BMO Financial Group Reports Good Second Quarter Core Results in the Context of the Current Market Environment



    
    Second Quarter 2009 Report to Shareholders

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    BMO Financial Group Reports Good Second Quarter Core Results in the
    Context of the Current Market Environment

    Personal and Commercial Banking Canada Continues to Report Strong Growth
    in Revenue and Net Income

    Solid Underlying Performance in BMO Capital Markets Businesses

    BMO's Already Strong Tier 1 Capital Ratio Increases to 10.70%
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    Financial Results Highlights:

    Second Quarter 2009 Compared with Second Quarter 2008:

    -   Net income of $358 million, down $284 million from a year ago

    -   EPS(1) of $0.61 and cash EPS(2) of $0.63, down $0.64 and $0.63,
        respectively, from a year ago

    -   Adjusted cash EPS(2) of $0.93 after excluding capital markets
        environment charges of $80 million after tax ($0.15 per share) and
        severance costs of $80 million after tax ($0.15 per share)

    -   Provisions for credit losses of $372 million, up $221 million from a
        year ago

    -   BMO's already strong Tier 1 Capital Ratio increases to 10.70%

    Year-to-Date 2009 Compared with a Year Ago:

    -   Net income of $583 million, compared with $897 million in 2008

    -   EPS of $1.00 compared with $1.72 and cash EPS of $1.03 compared with
        $1.75

    -   Adjusted cash EPS(2) of $2.02 after excluding capital markets
        environment charges of $439 million after tax ($0.84 per share) and
        severance costs of $80 million after tax ($0.15 per share)
    

    TORONTO, May 26 /CNW/ - For the second quarter ended April 30, 2009, BMO
Financial Group reported net income of $358 million or $0.61 per share.
Canadian personal and commercial banking reported strong results with net
income of $350 million, up $30 million or 9% from a year ago, and BMO Capital
Markets net income grew by $62 million or 33% to $249 million. Results
included losses of $80 million after tax ($0.15 per share) in respect of
capital markets environment charges, detailed in the Effects of the Capital
Markets Environment on Second Quarter Results section, and severance costs of
$80 million after tax ($0.15 per share) primarily related to simplifying our
management structure.
    "Our core businesses have again performed well, particularly in the
context of a recessionary environment," said Bill Downe, President and Chief
Executive Officer, BMO Financial Group. "P&C Canada, our Canadian personal and
commercial banking unit, continues to report strong year-over-year growth,
with revenue growing 8% and net income up 9% to $350 million. We are building
loyalty by listening to our customers to understand their needs and providing
guidance that helps them make better financial decisions. P&C Canada's loans
are up year over year as we continue to make credit available to Canadians and
their businesses. Our focus on the customer is paying off - for them and for
us.
    "Conditions remain challenging in credit markets and the capital markets
environment. However, we are appropriately positioned to cope with these
conditions. Our strong capital and liquidity positions permit us to make
opportunistic acquisitions, such as the acquisition of the Canadian life
insurance business we completed in the quarter.
    "BMO Capital Markets produced solid results, growing revenue 17% year
over year and increasing net income by 33% to $249 million. Results improved
year over year in a number of businesses with significantly better results
from corporate banking, interest-rate-sensitive businesses and equity
underwriting," said Mr. Downe. Overall performance in BMO Capital Markets was
affected by $80 million of after-tax charges as explained in the Effects of
the Capital Markets Environment on Second Quarter Results section.
    U.S. personal and commercial banking recorded year-over-year organic
growth in loans and deposits and improved net interest margin. Reported
results decreased from a year ago but increased adjusted for that period's net
gain on the Visa IPO. The weaker credit environment is affecting results but
we continue to make loans and provide deposit services to our customers while
managing our costs effectively. Mr. Downe also indicated that, "Harris was
recognized with a number one ranking for customer satisfaction in the Midwest
Region in the recently released J.D. Power and Associates 2009 Retail Banking
Satisfaction Study. Our focus on the customer is yielding results with
substantial growth in new households added to our customer base.
    "In our wealth management business, we continue to see strong growth in
term deposits, but results were affected by reduced levels of managed and
administered assets due primarily to the significant declines in equity
markets. We continue to maintain our high service standards and are managing
costs responsibly with due regard to the softer marketplace," said Mr. Downe.
    Our results continued to be affected by global recessionary pressures.
Provisions for credit losses in the current quarter totalled $372 million,
comprised of $127 million of specific provisions in Canada and $245 million in
the United States, with no increase in the general allowance. Specific
provisions increased $221 million from a year ago, primarily related to loans
in our U.S. personal and commercial business, but were down $56 million from
the first quarter. We expect the credit environment to continue to be
challenging through 2009 as the global economy remains weak.
    BMO employs an expected-loss-provisioning methodology whereby expected
credit losses are charged to the operating groups and the difference between
expected losses and actual losses is charged (or credited) to Corporate
Services.
    Mr. Downe concluded by indicating, "Our results for the quarter include
severance costs related primarily to simplifying our management structure
across our businesses and corporate support areas by reducing layers and
broadening mandates. As such, the changes are expected to reduce ongoing costs
and position our businesses to grow revenue and improve profitability with no
reduction in our customer service." We anticipate that once the changes to our
structure are completed, annual run-rate savings will exceed the $118 million
of severance costs.
    Corporate Services results rose from the first quarter, improving
appreciably excluding the severance costs recorded in the current quarter due
to increased revenues and lower provisions for credit losses. Higher revenues
reflect actions to lower the negative carry on certain asset-liability
interest rate and liquidity management positions and mark-to-market gains on
certain hedging activities compared to losses in the first quarter. Results
were weaker than a year ago due to reduced revenues and higher provisions for
credit losses. Low revenues were due to the negative carry on certain
asset-liability interest rate positions and the continued impact of funding
activities that have enhanced our strong liquidity position. Substantially all
of our estimated fiscal 2009 term-funding requirements have now been met.
    Today, we announced a third quarter dividend of $0.70 per common share,
unchanged from the preceding quarter and reflective of an annual dividend of
$2.80 per common share.

    
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    (1) All earnings per share (EPS) measures in this document refer to
        diluted EPS unless specified otherwise.
    (2) The adjustments that change results under generally accepted
        accounting principles (GAAP) to cash results are outlined in the Non-
        GAAP Measures section at the end of Management's Discussion and
        Analysis (MD&A), where such non-GAAP measures and their closest GAAP
        counterparts are outlined. Adjusted cash EPS is also a non-GAAP
        measure; please see details in the Effects of the Capital Markets
        Environment on Second Quarter Results section and also the Non-GAAP
        Measures section.
    

    Operating Segment Overview

    P&C Canada

    Net income was $350 million, up $30 million or 9.1% from a year ago.
Revenue increased across our personal, commercial and cards businesses, led by
volume growth across most products and an improved net interest margin.
Adjusted for the impact of a capital tax recovery a year ago, cash operating
leverage for the quarter was more than 3.0%.
    We continue to achieve strong results in tough market conditions.
    Our brand promise is a commitment to transparency and helping customers
make choices in the current environment to find the best solutions for them.
Our objective remains to increase market share in an environment of slower
growth.
    In personal banking, our focus on improving performance management,
investments in our branch network and new product offerings have paid off with
improved revenues and accelerating growth in deposit products. During the
quarter, we opened four new branches and, as previously announced, closed 68
In-Store branches. Most of our customers prefer the services of a full-service
bank with professional advice and relationship management capabilities,
combined with the convenience of our online banking channels. We have chosen
to invest in distribution channels that provide an exceptional customer
experience. As a result, we are narrowing the gap to the industry leader on
our personal loyalty score and our products-per-customer ratio is growing.
    In commercial banking, we are progressing toward our goal of becoming the
bank of choice for businesses across Canada. We rank second in Canadian
business market share. Despite the tight credit environment, we continue to
make credit available to our small and medium-sized business clients. We
achieved loan growth of 3.2% and have continued to gain market share, which
rose 37 basis points year over year and 4 basis points quarter over quarter to
19.97%. Year over year, we have improved our commercial customer loyalty score
and improved our products-per-customer ratio.
    We also grew our card business. Our brand marketing and promotions
together with better integration of card sales across the branch system have
resulted in continuing growth in the card portfolio.

    P&C U.S. (all amounts in U.S. $)

    Net income was $21 million, down $9 million or 31% from a year ago. Cash
net income was $27 million, down $8 million or 23%. Net income a year ago
included a $13 million after-tax gain on the IPO of Visa Inc. net of a
litigation accrual. Excluding this item, net income rose $4 million or 24%
from a year ago. Results benefited from year-over-year organic growth in loans
and deposits as well as increased deposit spreads and improved net interest
margin.
    The weak credit environment continues to affect results as there are
higher levels of non-performing loans and the costs of managing this portfolio
have increased. Together, they reduced earnings in the current quarter by $11
million, compared with a $5 million reduction a year ago.
    Revenue decreased $20 million or 7.8%. Excluding the gain from the IPO,
revenue increased $18 million, largely driven by our Wisconsin acquisitions
and deposit growth, partially offset by the $7 million increased impact of
weaker credit markets. Net interest margin increased from last year due to new
deposit generation and our actions to mitigate the impact of rising long-term
funding costs.
    We are maintaining our strong focus on managing expenses and on new
customer acquisition in both the consumer and commercial businesses, while we
continue to make loans and provide deposit services to our customers. Net new
household customer acquisitions are substantially above last year and we're
starting to see positive trends in core deposits.
    In a recent study by J.D. Power and Associates analyzing customer
satisfaction with the retail banking experience, Harris was ranked best of 21
banks rated and scored better than most competitors in four out of five
measures.
    Our Retail Net Promoter Score, a measure of the strength of customer
loyalty, improved two points from both the prior quarter and from a year ago
to 44, at a time when the scores of a number of our competitors deteriorated.

    Private Client Group

    Net income was $62 million, compared to $107 million a year earlier.
Results were impacted by difficult equity markets and a low interest rate
environment. Revenue for the quarter decreased $63 million or 12% from a year
ago, primarily due to lower fee-based and commission revenue in Full-Service
Investing and lower revenue in our mutual fund businesses on significantly
lower assets. Net interest income declined mostly due to spread compression on
deposit balances in our brokerage businesses in the competitive low interest
rate environment.
    Assets under management and administration have been affected by softer
market conditions and decreased $21 billion or 8.7%, despite a $13 billion
benefit related to the stronger U.S. dollar. There was strong volume growth in
term deposits, which increased $9 billion or 21% year over year. Given recent
challenges in the global economy and equity markets, we have made adjustments
in how we spend and allocate resources. We will continue to deliver the high
level of service our clients expect while continuing to responsibly manage our
employee and discretionary expenses in the current market conditions.
    On April 1, we completed the acquisition of AIG Life Insurance Company of
Canada (rebranded as BMO Life Assurance) at a cost of $330 million. This
acquisition strengthens BMO Financial Group's competitive position, giving
immediate scale and capabilities in the life insurance market and will allow
us to meet our clients' unmet insurance needs. To secure their lifestyle and
retirement needs, our clients are looking for both investment and
tax-efficient insurance solutions. To help our clients, BMO Nesbitt Burns Inc.
has more than 800 investment advisors who are also life insurance agents and,
in Quebec, financial security advisors with BMO Nesbitt Burns Financial
Services Inc. With the completion of the acquisition, BMO's life insurance
business is strengthened through the addition of 300 experienced employees,
approximately 400,000 customers and access to a network of more than 5,000
active independent brokers across the country. The acquisition substantially
enhances our ability to better serve our clients' wealth management needs and
reinforces our customer-focused strategy. BMO's life insurance business is now
one of the largest among bank-owned life insurance companies with a top 10
market share in the Canadian life insurance market.
    Effective in the third quarter, all of BMO's insurance businesses will
operate within Private Client Group given the alignment with the wealth
management strategy and the desire to bring insurance capabilities and skill
sets together.
    Private Client Group continues to be recognized for its products and
services. The BMO Dividend Fund was presented with the 2009 Lipper Award for
best fund over ten years in the Canadian Dividend & Equity Income category.
The Lipper Fund Awards program recognizes funds that have excelled in
delivering consistently strong risk-adjusted performance relative to peers.

    BMO Capital Markets

    Net income for the quarter was $249 million, up $62 million or 33% from a
year ago. This increase was driven primarily by revenue generation, including
significantly higher corporate banking revenue due to both increased spread
and lending fees, higher revenues from our interest-rate-sensitive businesses
and improvement in equity underwriting fees. In addition to growing revenues,
we have implemented various expense management initiatives. Due to continued
weakness in the economic and capital market environments, results for the
quarter reflected charges of $117 million ($80 million after tax) as described
in the Effects of the Capital Markets Environment on Second Quarter Results
section. Results a year ago included a net benefit of $42 million ($28 million
after tax) as described in the Notable Items section at the end of the MD&A.
    Notwithstanding charges related to the capital markets environment, BMO
Capital Markets delivered solid earnings this quarter. This quarter's
performance reflected the strength of our underlying core businesses and the
overall strategic focus of managing the total risk-return of the group. The
continued focus on our core clients and active balance sheet management has
enabled us to grow businesses that fit in with our client-focused strategy,
such as our U.S. Municipal Bond business. Corporate banking initiatives in
recent quarters have significantly improved the performance of our lending
business.
    BMO Capital Markets was involved in 116 new issues in the quarter
including 33 corporate debt deals, 38 government deals, 35 common equity
transactions and 10 issues of preferred shares, raising $47.1 billion, up $3.8
billion from last quarter.

    
                     Management's Discussion and Analysis
    

    MD&A commentary is as of May 26, 2009. Unless otherwise indicated, all
amounts are in Canadian dollars and have been derived from financial
statements prepared in accordance with Canadian generally accepted accounting
principles (GAAP). The MD&A should be read in conjunction with the unaudited
consolidated financial statements for the period ended April 30, 2009,
included in this document, and the annual MD&A for the year ended October 31,
2008, included in BMO's 2008 Annual Report. The material that precedes this
section comprises part of this MD&A.

    
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    Bank of Montreal uses a unified branding approach that links all of the
    organization's member companies. Bank of Montreal, together with its
    subsidiaries, is known as BMO Financial Group. As such, in this document,
    the names BMO and BMO Financial Group mean Bank of Montreal, together
    with its subsidiaries.
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    Summary Data

    (Unaudited)
    (Canadian $ in                              Increase            Increase
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q2-2009         vs. Q2-2008         vs. Q1-2009
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    Net interest income        1,337       163       14%         6        1%
    Non-interest revenue       1,318      (128)      (9%)      207       19%
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    Revenue                    2,655        35        1%       213        9%
    Specific provision for
     credit losses               372       221     +100%       (56)     (13%)
    Increase in the general
     allowance                     -         -         -         -         -
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    Total provision for
     credit losses               372       221     +100%       (56)     (13%)
    Non-interest expense       1,888       208       12%        47        3%
    Provision for (recovery
     of) income taxes             18      (110)     (86%)       89     +100%
    Non-controlling interest
     in subsidiaries              19         -         -         -         -
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    Net income                   358      (284)     (44%)      133       59%

    Amortization of
     acquisition-related
     intangible assets
     (after tax)(1)               10         2       32%         2       23%
    Cash net income(2)           368      (282)     (43%)      135       58%
    Earnings per share -
     basic ($)                  0.61     (0.64)     (51%)     0.22       56%
    Earnings per share -
     diluted ($)                0.61     (0.64)     (51%)     0.22       56%
    Cash earnings per share
     - diluted ($)(2)           0.63     (0.63)     (50%)     0.23       58%
    Return on equity (ROE)      8.1%               (9.8%)               3.2%
    Cash ROE(2)                 8.4%               (9.7%)               3.2%
    Productivity ratio         71.1%                7.0%               (4.3%)
    Cash productivity
     ratio(2)                  70.7%                6.9%               (4.3%)
    Operating leverage        (11.1%)                 nm                  nm
    Cash operating
     leverage(2)              (11.0%)                 nm                  nm
    Net interest margin
     on earning assets         1.55%               0.07%               0.04%
    Effective tax rate          4.4%              (11.9%)              45.4%

    Capital Ratios
      Tier 1 Capital Ratio    10.70%               1.28%               0.49%
      Total Capital Ratio     13.20%               1.56%               0.33%
    Net income:
    Personal and Commercial
     Banking                     375        25        7%        16        5%
      P&C Canada                 350        30        9%        25        8%
      P&C U.S.                    25        (5)     (15%)       (9)     (26%)
    Private Client Group          62       (45)     (42%)        5        9%
    BMO Capital Markets          249        62       33%        70       40%
    Corporate Services,
     including Technology
     and Operations (T&O)       (328)     (326)   (+100%)       42       11%
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    BMO Financial Group
     Net Income                  358      (284)     (44%)      133       59%
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    (Unaudited)
    (Canadian $ in                              Increase
     millions, except                          (Decrease)
     as noted)              YTD-2009        vs. YTD-2008
    -----------------------------------------------------
    Net interest income        2,668       280       12%
    Non interest revenue       2,429       171        8%
    -----------------------------------------------------
    Revenue                    5,097       451       10%
    Specific provision for
     credit losses               800       479     +100%
    Increase in the general
     allowance                     -       (60)    (100%)
    -----------------------------------------------------
    Total provision for
     credit losses               800       419     +100%
    Non-interest expense       3,729       435       13%
    Provision for (recovery
     of) Income taxes            (53)      (90)   (+100%)
    Non-controlling interest
     in subsidiaries              38         1        6%
    -----------------------------------------------------
    Net income                   583      (314)     (35%)

    Amortization of
     acquisition-related
     intangible assets
     (after tax)(1)               18         2       16%
    Cash net income(2)           601      (312)     (34%)
    Earnings per share -
     basic ($)                  1.00     (0.73)     (42%)
    Earnings per share -
     diluted ($)                1.00     (0.72)     (42%)
    Cash earnings per share
     - diluted ($)(2)           1.03     (0.72)     (41%)
    Return on equity (ROE)      6.5%               (5.7%)
    Cash ROE(2)                 6.8%               (5.7%)
    Productivity ratio         73.2%                2.3%
    Cash productivity
     ratio(2)                  72.7%                2.2%
    Operating leverage         (3.5%)                 nm
    Cash operating
     leverage(2)               (3.5%)                 nm
    Net interest margin
     on earning assets         1.53%               0.07%
    Effective tax rate         (9.4%)             (13.2%)

    Capital Ratios
      Tier 1 Capital Ratio    10.70%               1.28%
      Total Capital Ratio     13.20%               1.56%
    Net income:
    Personal and Commercial
     Banking                     734        67       10%
      P&C Canada                 675        64       10%
      P&C U.S.                    59         3        5%
    Private Client Group         119       (84)     (41%)
    BMO Capital Markets          428       270     +100%
    Corporate Services,
     including Technology
     and Operations (T&O)       (698)     (567)   (+100%)
    -----------------------------------------------------

    BMO Financial Group
     Net Income                  583      (314)     (35%)
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    (1) The amortization of non-acquisition-related intangible assets is not
        added back in the determination of cash net income.
    (2) These are non-GAAP amounts or non-GAAP measures. Please see the Non-
        GAAP Measures at the end of the MD&A, which outlines the use of non-
        GAAP measures in this document.

    nm - not meaningful.

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    Management's Responsibility for Financial Information

    BMO's CEO and Interim CFO have signed certifications relating to the
appropriateness of the financial disclosures in our interim MD&A and unaudited
interim consolidated financial statements for the period ended April 30, 2009
and relating to the design of our disclosure controls and procedures and
internal control over financial reporting.
    BMO's internal control over financial reporting includes policies and
procedures that: pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of BMO; provide reasonable assurance that transactions are recorded as
necessary to permit preparation of the financial statements in accordance with
Canadian generally accepted accounting principles and the requirements of the
Securities and Exchange Commission in the United States, as applicable; ensure
receipts and expenditures of BMO are being made only in accordance with
authorizations of management and directors of BMO; and provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of BMO's assets that could have a material
effect on the financial statements.
    Because of its inherent limitations, internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements. Further, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
    There were no changes in our internal control over financial reporting
during the quarter ended April 30, 2009 that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
    As in prior quarters, BMO's audit committee reviewed this document,
including the unaudited interim consolidated financial statements, and BMO's
Board of Directors approved the document prior to its release.
    A comprehensive discussion of our businesses, strategies and objectives
can be found in Management's Discussion and Analysis in BMO's 2008 Annual
Report, which can be accessed on our web site at
www.bmo.com/investorrelations. Readers are also encouraged to visit the site
to view other quarterly financial information.

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    Caution Regarding Forward-Looking Statements

    Bank of Montreal's public communications often include written or oral
forward-looking statements. Statements of this type are included in this
document, and may be included in other filings with Canadian securities
regulators or the U.S. Securities and Exchange Commission, or in other
communications. All such statements are made pursuant to the 'safe harbor'
provisions of, and are intended to be forward-looking statements under, the
United States Private Securities Litigation Reform Act of 1995 and any
applicable Canadian securities legislation. Forward-looking statements may
involve, but are not limited to, comments with respect to our objectives and
priorities for 2009 and beyond, our strategies or future actions, our targets,
expectations for our financial condition or share price, and the results of or
outlook for our operations or for the Canadian and U.S. economies.
    By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties. There is
significant risk that predictions, forecasts, conclusions or projections will
not prove to be accurate, that our assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts,
conclusions or projections. We caution readers of this document not to place
undue reliance on our forward-looking statements as a number of factors could
cause actual future results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions expressed
in the forward-looking statements.
    The future outcomes that relate to forward-looking statements may be
influenced by many factors, including but not limited to: general economic and
market conditions in the countries in which we operate; interest rate and
currency value fluctuations; changes in monetary policy; the degree of
competition in the geographic and business areas in which we operate; changes
in laws; judicial or regulatory proceedings; the accuracy and completeness of
the information we obtain with respect to our customers and counterparties;
our ability to execute our strategic plans and to complete and integrate
acquisitions; critical accounting estimates; operational and infrastructure
risks; general political conditions; global capital market activities; the
possible effects on our business of war or terrorist activities; disease or
illness that impacts on local, national or international economies;
disruptions to public infrastructure, such as transportation, communications,
power or water supply; and technological changes.
    We caution that the foregoing list is not exhaustive of all possible
factors. Other factors could adversely affect our results. For more
information, please see the discussion on pages 30 and 31 of the BMO 2008
Annual Report, which outlines in detail certain key factors that may affect
our future results. When relying on forward-looking statements to make
decisions with respect to Bank of Montreal, investors and others should
carefully consider these factors, as well as other uncertainties and potential
events, and the inherent uncertainty of forward-looking statements. Bank of
Montreal does not undertake to update any forward-looking statement, whether
written or oral, that may be made, from time to time, by the organization or
on its behalf, except as required by law. The forward-looking information
contained in this document is presented for the purpose of assisting our
shareholders in understanding our financial position as at and for the periods
ended on the dates presented and our strategic priorities and objectives, and
may not be appropriate for other purposes.
    Assumptions about our ability to operate successfully without re-staffing
positions to be eliminated were material factors we considered when
establishing our expectation that annual run-rate savings will exceed the
severance costs incurred.
    Assumptions about the level of asset sales, expected asset sale prices,
net funding cost, credit quality and risk of default and losses on default of
the underlying assets of the structured investment vehicles were material
factors we considered when establishing our expectations regarding the
structured investment vehicles discussed in this document, including the
amount to be drawn under the BMO liquidity facilities and the expectation that
the first-loss protection provided by the subordinate capital notes will
exceed future losses. Key assumptions included that assets would continue to
be sold with a view to reducing the size of the structured investment
vehicles, under various asset price scenarios, and that the level of defaults
and losses will be consistent with the credit quality of the underlying assets
and our current expectations regarding challenging market conditions
continuing.
    Assumptions about the level of defaults and losses on defaults were
material factors we considered when establishing our expectation of the future
performance of the transactions that Apex Trust has entered into. Key
assumptions included that the level of defaults and losses on defaults would
be consistent with historical experience. Material factors that were taken
into account when establishing our expectations of the future risk of credit
losses in Apex Trust included industry diversification in the portfolio,
initial credit quality by portfolio and the first-loss protection incorporated
into the structure.
    Assumptions about the performance of the Canadian and U.S. economies in
2009 and how it would affect our businesses were material factors we
considered when setting our strategic priorities and objectives and our
outlook for our businesses. Key assumptions included that the Canadian and the
U.S. economies would contract in the first half of 2009, and that interest
rates and inflation would remain low. Our current expectations are for weaker
economic and credit market conditions and lower interest rates than we
anticipated at the end of fiscal 2008. We also assumed that housing markets in
Canada would weaken in 2009 and strengthen in the second half of the year in
the United States. We assumed that capital markets would improve somewhat in
the second half of 2009 and that the Canadian dollar would strengthen modestly
relative to the U.S. dollar. In determining our expectations for economic
growth, both broadly and in the financial services sector, we primarily
consider historical economic data provided by the Canadian and U.S.
governments and their agencies. Tax laws in the countries in which we operate,
primarily Canada and the United States, are material factors we consider when
determining our sustainable effective tax rate.

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    Regulatory Filings

    Our continuous disclosure materials, including our interim filings,
annual MD&A and audited consolidated financial statements, our Annual
Information Form and the Notice of Annual Meeting of Shareholders and Proxy
Circular are available on our web site at www.bmo.com/investorrelations, on
the Canadian Securities Administrators' web site at www.sedar.com and on the
EDGAR section of the SEC's web site at www.sec.gov.

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    Economic Outlook

    The Canadian economy is expected to contract 2.5% in 2009, though the
rate of decline should diminish as the year progresses. Weak global demand
will continue to reduce exports. Housing markets and residential mortgage
growth are expected to moderate further, though improved affordability should
help stabilize the market later this year. Despite record low interest rates,
growth in consumer spending and personal credit should continue to slow in the
face of rising unemployment. Business investment and loan growth are expected
to decline sharply in response to last year's downturn in commodity prices and
further restructuring in the auto industry. The unemployment rate could climb
above 9% by the fall, more than three percentage points above last year's low,
though still well below the highs of previous recessions. The Bank of Canada
is expected to keep overnight rates near zero well into next year and
stimulative monetary and fiscal policies should support a moderate economic
recovery in late 2009. The Canadian dollar is projected to appreciate in
tandem with a firming in commodity prices as the global economy recovers later
this year.
    The U.S. economy is expected to remain in a deep recession in the first
half of 2009, before recovering later in the year in response to expansive
monetary and fiscal policies and to oil prices that are down sharply from
mid-2008. Housing markets are showing tentative signs of stabilizing due to
record-high affordability, though tight credit standards and heavy job losses
point to continued softness in residential mortgage demand. Consumer spending
has improved modestly but is expected to remain weak as households increase
their savings rates and repay debts. Companies will likely continue to reduce
spending, resulting in weak growth in business credit. The unemployment rate
is projected to climb toward 10% later this year, the highest in 26 years. The
Federal Reserve is expected to keep rates near zero until spring 2010, and to
employ a range of special lending programs and asset purchases to increase the
availability of credit to businesses and households. Capital market activities
should continue to strengthen as the uncertainty in credit markets and the
economy abates.
    This Economic Outlook section contains forward-looking statements. Please
see the Caution Regarding Forward-Looking Statements.

    Effects of the Capital Markets Environment on Second Quarter Results

    The market environment remains weak. Results in the second quarter of
2009 were affected by capital markets environment charges of $117 million ($80
million after tax and $0.15 per share) recorded in BMO Capital Markets in
respect of:

    
    -   charges of $215 million ($147 million after tax) on exposures to a
        Canadian credit protection vehicle (Apex); and

    -   benefit for credit valuation adjustments (CVA) of $98 million pre-tax
        ($67 million after tax).
    

    The above charges reduced trading non-interest revenue by $117 million.
    The $215 million of charges on exposures to the credit protection vehicle
were comprised of $41 million of unrealized mark-to-market losses on BMO's
investment in the vehicle's mid-term notes and a charge of $174 million in
connection with the renegotiation of the total return swap (TRS) on $600
million of notes. The $174 million one-time charge comprises $78 million
related to the write-off of the asset value on the original TRS and $96
million related to restructuring the TRS to match the maturity of the notes at
a fixed price. By restructuring the TRS, we have eliminated the price reset
risk and significantly reduced the earnings volatility associated with the TRS
transaction.

    Foreign Exchange

    The Canadian dollar equivalents of BMO's U.S. dollar-denominated net
income, revenues, expenses, provisions for credit losses and income taxes were
increased relative to the second quarter of 2008 by the strengthening of the
U.S. dollar in the past year. The average Canadian/U.S. dollar exchange rate
in the second quarter, expressed in terms of the Canadian dollar cost of a
U.S. dollar, rose by 23% from a year ago. The average exchange rate in the
current quarter rose by 1% from the first quarter of 2009, although the rate
at the end of the quarter fell from the end of the first quarter as the
Canadian dollar strengthened. The following table indicates the relevant
average Canadian/U.S. dollar exchange rates and the impact of changes in the
rates.

    
    Effects of U.S. Dollar Exchange Rate Fluctuations on BMO's Results

                                                       Q2-2009      YTD-2009
                                                     vs.       vs.       vs.
    (Canadian $ in millions, except as noted)    Q2-2008   Q1-2009  YTD-2008
    -------------------------------------------------------------------------
    Canadian/U.S. dollar exchange rate
     (average)
      Current period                              1.2417    1.2417    1.2343
      Prior period                                1.0065    1.2271    1.0024
    Increased revenue                                138         9       308
    Increased expense                                (96)       (6)     (188)
    Increased provision for credit losses            (48)       (3)     (108)
    Increased income tax recovery                     15         1        20
    -------------------------------------------------------------------------
    Increased net income                               9         1        32
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At the start of each quarter, BMO enters into hedging transactions that
are expected to partially offset the pre-tax effects of exchange rate
fluctuations in the quarter on our expected U.S. dollar net income for that
quarter. As such, the hedging activities partially mitigate the impact of
exchange rate fluctuations within a single quarter; however, the hedging
transactions are not designed to offset the impact of year-over-year or
quarter-over-quarter fluctuations in exchange rates. The U.S. dollar
strengthened from Cdn$1.2045 at October 31, 2008 to an average of Cdn$1.2271
in the first quarter. It also strengthened but more modestly over the course
of the current quarter, as the exchange rate increased from Cdn$1.2265 per
U.S. dollar at January 31, 2009 to an average of Cdn$1.2417. Hedging
transactions had no impact on results for the quarter and resulted in an
after-tax loss of $1 million for the year to date. The gain or loss from
hedging transactions in future periods will be determined by both future
currency fluctuations and the amount of underlying future hedging
transactions, since the transactions are entered into each quarter in relation
to expected U.S. dollar denominated net income for the next three months.
    The effect of currency fluctuations on our investments in foreign
operations is discussed in the Income Taxes section.

    Other Value Measures

    Net economic profit was negative $87 million (see the Non-GAAP Measures
section), compared with $266 million in the second quarter of 2008 and
negative $219 million in the first quarter.
    The total shareholder return (TSR) on an investment in BMO common shares
was 21.7% in the second quarter and -15.2% for the twelve months ended April
30, 2009. BMO's average annual TSR for the five-year period ended April 30,
2009 was -1.2%.

    Net Income

    Q2 2009 vs Q2 2008

    Net income was $358 million for the second quarter of 2009, down $284
million or 44% from a year ago. Earnings per share were $0.61, compared with
$1.25. Results for the quarter include $80 million after tax ($0.15 per share)
in respect of capital markets environment charges reflected in BMO Capital
Markets as set out in the preceding Effects of the Capital Markets Environment
on Second Quarter Results section as well as a charge of $80 million after tax
($0.15 per share) for severance costs reflected in Corporate Services. Results
a year ago included a beneficial impact from valuation adjustments of $42
million ($28 million after tax and $0.06 per share) in BMO Capital Markets, as
set out in the Notable Items section that follows at the end of this MD&A.
Excluding these items, net income was $518 million compared with $614 million
a year ago and EPS was $0.91 compared with $1.19 a year ago.
    Provisions for credit losses were $372 million, up $221 million as the
credit environment was considerably weaker than a year ago.
    P&C Canada net income increased a strong $30 million or 9.1% despite a
slowing economy. There was volume growth across most products and an improved
net interest margin.
    P&C U.S. net income decreased Cdn$5 million, or by US$9 million and 31%.
Excluding last year's US$13 million after-tax benefit of Visa Inc. IPO
proceeds net of a litigation accrual, net income increased US$4 million or
24%. Results benefited from organic loan and deposit growth and improved net
interest margin, while the weak credit environment reduced earnings by US$11
million in the quarter.
    Private Client Group net income decreased $45 million or 42%, primarily
due to weaker market conditions that lowered the levels of managed and
administered assets.
    BMO Capital Markets net income increased $62 million or 33%. Current
results reflect $80 million of after-tax charges in respect of the weaker
capital markets environment. Last year's results reflected a net recovery of
$28 million after tax. Revenues were up strongly due to increases in corporate
banking net interest income, revenues from our interest-rate-sensitive
businesses and lending and equity underwriting fees, partially offset by lower
trading revenue. The latter reduction related mainly to reduced interest rate
trading and included the impact of charges in respect of the capital markets
environment in both periods.
    Corporate Services results were $326 million lower than in the prior year
due primarily to higher specific provisions for credit losses, lower revenues
due to the negative carry on certain asset-liability interest rate positions
and the continued impact of funding activities that have enhanced our strong
liquidity position, as well as the $80 million of after-tax severance costs
outlined above.

    Q2 2009 vs Q1 2009

    Net income increased $133 million or 59%. Results in the first quarter
were lowered by $528 million ($359 million after tax and $0.69 per share) in
respect of losses related to deterioration in the capital markets environment,
as detailed in the Notable Items section at the end of the MD&A. Provisions
for credit losses fell $56 million.
    In P&C Canada, net income increased $25 million or 7.6%. Revenue rose $18
million or 1.4%, driven by improved net interest margin and lower investment
securities losses, partially offset by the impact of three fewer calendar days
in the second quarter and lower volumes. Non-interest expense decreased $13
million or 1.9% due to three fewer days and annual stock-based compensation
costs for employees eligible to retire that were expensed in the prior
quarter.
    P&C U.S. net income fell US$6 million or 26% largely due to a decline in
deposit revenues and the impact of fewer days in the current quarter. The
first quarter also had the benefit of a credit for the reduction to the Visa
litigation accrual.
    Private Client Group net income increased $5 million or 8.7%. Revenues
decreased $11 million or 2.6% due to weaker equity market conditions. Revenues
in the prior quarter were lowered $17 million ($11 million after tax) by
mark-to-market adjustments recorded on auction-rate securities. Non-interest
expense decreased $22 million or 5.7% due to active expense management and
lower revenue-based costs.
    BMO Capital Markets net income increased $70 million or 40%, due to
increased revenues and reduced expense. Revenue rose $85 million or 12% due to
higher corporate banking revenues and merger and acquisition fees and lower
charges in respect of the capital markets environment. Reduced expenses were
primarily attributable to severance costs included in the group's results in
the first quarter.
    Corporate Services results improved $42 million but increased $122
million excluding the $80 million of after-tax severance costs. There were
higher revenues and lower specific provisions for credit losses. Improved
revenues reflect actions taken to lower the negative carry on certain
asset-liability interest rate and liquidity management positions and
mark-to-market gains on hedges compared with losses in the first quarter.

    Q2 YTD 2009 vs Q2 YTD 2008

    Net income decreased $314 million or 35% to $583 million. Net income for
the current period was lowered by a net $519 million after tax of charges as
described in the two preceding sections discussing results for the second and
first quarters of 2009. Net income in the comparable period of 2008 was
lowered by notable items totalling $334 million after tax in respect of
capital markets environment charges.
    In P&C Canada, net income increased $64 million or 10%. Increased
revenues were driven by volume growth across most products, an improved net
interest margin and higher cards and Moneris revenue, partially offset by net
investment securities losses in softer equity markets. Expenses rose primarily
due to increases in employee benefits costs, capital taxes, premises and
maintenance, Moneris costs and initiatives spending.
    P&C U.S. net income fell US$8 million or 15%. Revenue increased US$9
million or 1.9%. Excluding the Visa Inc. IPO gain of US$38 million in the
second quarter of 2008 and the US$30 million impact of the Wisconsin
acquisitions, revenue improved US$17 million largely due to balance sheet
growth and deposit spread improvement, partially offset by decreased loan
spreads and the impact of weaker credit markets. Weaker credit markets also
contributed to higher expenses.
    Private Client Group net income decreased $84 million or 41% from the
same period a year ago. The current year included the $11 million after-tax
charge relating to auction-rate securities. Results were affected by lower
revenue in full-service investing and lower fee-based revenue in our mutual
fund businesses, reflecting the negative impact of softer equity market
conditions on the group's assets under management and administration.
    BMO Capital Markets net income increased $270 million. Results for the
current year to date were affected by charges of $428 million after tax
related to deterioration in capital markets. Results in the comparable period
of 2008 were affected by charges of $296 million after tax. Improved
performance was attributable to significantly increased trading revenues and
corporate banking revenues. Revenues from our interest-rate-sensitive
businesses and equity underwriting fees were also higher, partially offset by
increased securities losses.
    Corporate Services net income decreased $567 million. The decrease was
attributable to higher provisions for credit losses and lower revenues and
severance costs as discussed in the preceding sections.

    Revenue

    BMO analyzes consolidated revenues on a GAAP basis. However, like many
banks, BMO analyzes revenue of its operating groups and associated ratios
computed using revenue on a taxable equivalent basis (teb). This basis
includes an adjustment that increases GAAP revenues and the GAAP provision for
income taxes by an amount that would raise revenues on certain tax-exempt
securities to a level equivalent to amounts that would incur tax at the
statutory rate. The offset to the group teb adjustments is reflected in
Corporate Services revenues.
    Total revenue increased $35 million or 1.3% from a year ago. There was
strong growth in P&C Canada and BMO Capital Markets with reductions in the
other groups and in Corporate Services. Revenue increased $213 million or 8.8%
from the first quarter, in large part due to the charges recorded in that
period and to significantly improved revenues in Corporate Services.
    The stronger U.S. dollar increased revenue growth by $138 million or 5.2
percentage points year over year and $9 million or 0.4 percentage points from
the first quarter. Changes in net interest income and non-interest revenue are
reviewed in the sections that follow.

    Net Interest Income

    Net interest income increased $163 million or 14% from a year ago. Volume
growth in BMO Capital Markets and P&C U.S., higher trading net interest income
and corporate lending spreads in BMO Capital Markets, and improved spread in
P&C Canada were partly offset by a significant decline in Corporate Services
net interest income. Average earning assets increased $29 billion, due
primarily to the stronger U.S. dollar, acquisitions and organic loan growth in
P&C U.S., and growth in cash management deposits and securities in BMO Capital
Markets.
    Relative to the first quarter, net interest income was up slightly.
Average earning assets increased $4 billion.
    Year to date, net interest income increased $280 million or 12%, driven
by volume growth in all of the operating groups including P&C Canada on a
basis that adjusts for securitization, partly offset by a significant decline
in Corporate Services. Average earning assets increased $22 billion, primarily
due to increased assets relating to higher customer deposit balances,
reflecting the attraction of bank deposits in the current environment, and
increased money market securities balances in BMO Capital Markets. P&C U.S.
earning assets increased $7 billion primarily due to acquisitions.
    BMO's overall net interest margin on earning assets for the second
quarter of 2009 was 1.55%, or 7 basis points higher than in the second quarter
of the prior year and 4 basis points higher than in the first quarter. The
main drivers of the change in total bank margin are the individual group
margins, the change in the magnitude of each operating group's assets and the
level of net interest income recorded in Corporate Services. The
year-over-year increase of 7 basis points was mainly due to actions taken to
mitigate the impact of rising long-term funding costs and higher volumes in
more profitable products in P&C Canada as well as strong performance in
corporate lending and higher trading net interest income in BMO Capital
Markets, partially offset by reduced net interest income in Corporate
Services. Private Client Group had a significant margin decline but it is a
relatively smaller group and its effect on the total bank margin change was
minimal.
    Relative to a year ago, net interest margin was higher by 30 basis points
in P&C Canada. Approximately one-half of the increase was attributable to
having securitized low-margin mortgages. The remaining increase was driven by
higher volumes in more profitable products including personal loans, personal
and commercial deposits and credit card loans, favourable prime rates relative
to rates on Bankers' Acceptances and actions to mitigate the impact of rising
long-term funding costs. These factors were partially offset by lower mortgage
refinancing fees. P&C Canada net interest margin also improved 17 basis points
relative to the first quarter, due to actions to mitigate the impact of rising
long-term funding costs and favourable prime rates relative to rates on
Bankers' Acceptances, partially offset by lower mortgage refinancing fees. In
P&C U.S., net interest margin improved by 12 basis points year over year,
despite absorbing the 6 basis point impact of weaker credit markets, due to
continued focus on pricing and new deposit generation. BMO Capital Markets net
interest margin rose 53 basis points from a year ago due to significantly
higher spreads in corporate lending and increased trading net interest income.
Corporate Services net interest income improved appreciably relative to the
first quarter primarily reflecting actions to lower the negative carry on
certain asset-liability interest rate and liquidity management positions.
Relative to a year ago, Corporate Services net interest income declined
significantly primarily due to a negative carry on certain asset-liability
management interest rate positions, the continued impact of funding activities
to enhance our strong liquidity position and the impact of credit card
securitizations completed in 2008.
    Year to date, BMO's overall net interest margin rose 7 basis points due
to higher volumes in more profitable products in P&C Canada, and higher
spreads in corporate lending and interest-rate-sensitive businesses as well as
increased trading net interest income in BMO Capital Markets, offset in large
part by reduced net interest income in Corporate Services.

    
    Net Interest Margin (teb)(*)
                                      Increase  Increase            Increase
                                     (Decrease)(Decrease)          (Decrease)
                                           vs.       vs.                 vs.
    (In basis points)        Q2-2009   Q2-2008   Q1-2009  YTD-2009  YTD-2008
    -------------------------------------------------------------------------
    P&C Canada                   289        30        17       280        22
    P&C U.S.                     305        12         -       305        10
    -------------------------------------------------------------------------
    Personal and Commercial
     Client Group                293        28        14       286        22
    Private Client Group         683      (237)     (165)      762      (131)
    BMO Capital Markets          109        53         2       108        47
    Corporate Services,
     including Technology and
     Operations (T&O)(xx)         nm        nm        nm        nm        nm
    -------------------------------------------------------------------------
    Total BMO                    155         7         4       153         7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Canadian Retail(xxx)   319        24         9       314        21
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)    Net interest margin is disclosed and computed with reference to
           average earning assets, rather than total assets. This basis
           provides a more relevant measure of margins and changes in
           margins. Operating group margins are stated on a teb basis while
           total BMO margin is stated on a GAAP basis.
    (xx)   Corporate Services net interest income is negative and lowers
           BMO's overall net interest margin to a greater degree in 2009 than
           in prior years.
    (xxx)  Total Canadian retail margin represents the net interest margin of
           the combined Canadian business of P&C Canada and Private Client
           Group.
    nm  -  not meaningful
    

    Non-Interest Revenue

    Non-interest revenue decreased $128 million or 8.9% from a year ago.
Non-interest revenue was affected by the $117 million of charges included in
trading non-interest revenue, as outlined in the Effects of the Capital
Markets Environment on Second Quarter Results section. Non-interest revenue in
the second quarter of 2008 was affected by a net recovery as outlined in the
Notable Items section. There were reductions in securities commissions and
fees, mutual fund revenues and securities gains due to the weaker equity
environment. Lending fees increased in BMO Capital Markets and deposit and
payment service charges also increased. Securitization revenues increased $129
million from a year ago to $262 million. The increase was attributable to $100
million from securitizing credit card loans and $29 million from securitizing
residential mortgages. Revenues included gains of $36 million on the sale of
loans for new securitizations, down $20 million from a year ago, and gains of
$172 million on sales of loans to revolving securitization vehicles, up $112
million from a year ago. Securitizations have resulted in the recognition of
less interest income ($171 million less) in the quarter, as well as reduced
credit card fees ($118 million less) and lower provisions for credit losses
($44 million less). The combined impact of securitizing assets in the current
and prior periods increased pre-tax income in the current quarter by $17
million. We securitize loans primarily to obtain alternate sources of
cost-effective funding. In the quarter, we securitized $950 million of
residential mortgage loans. Securitizations are detailed in Note 4 to the
unaudited consolidated financial statements.
    Relative to the first quarter, non-interest revenue increased $207
million or 19%. The prior quarter was impacted by $528 million of capital
markets environment charges as set out in the Notable Items section that
follows at the end of this MD&A. There were increased non-interest revenues in
all of the operating groups and Corporate Services. P&C Canada revenues
increased primarily due to lower investment securities losses in the current
quarter. Private Client Group non-interest revenue increased due to insurance
revenues on the acquisition of BMO Life Assurance and a charge reflected in
the first quarter on the valuation of auction-rate securities that we offered
to purchase from client accounts, partially offset by lower revenue in
full-service investing and lower fee-based revenue in the mutual fund
businesses. BMO Capital Markets non-interest revenue rose significantly due to
reduced securities losses and increased lending and merger and acquisition
fees, partially offset by a large reduction in trading revenues. Corporate
Services non-interest revenues rose primarily due to mark-to-market gains on
hedging activities compared with losses in the first quarter. The market
interest rate volatility resulted in mark-to-market losses in the first
quarter on derivative hedges that do not qualify for hedge accounting.
    Year to date, non-interest revenue increased $171 million or 7.6%. There
was growth in P&C Canada due to higher revenue from cards and Moneris
businesses, strong growth in BMO Capital Markets due to higher trading
revenues and lending fees and growth in Corporate Services due to increased
securitization revenue. Private Client Group non-interest revenues decreased
as there were reductions in securities commissions and fees and mutual fund
revenues in the weaker equity market environment.

    Non-Interest Expense

    Non-interest expense increased $208 million or 12% from a year ago to
$1,888 million. There were increases in each of the groups. The stronger U.S.
dollar increased expense growth by $96 million or 5.7 percentage points. The
remaining increase was largely attributable to the $34 million impact of
acquired businesses and the $118 million of severance costs recorded in
Corporate Services. Excluding these three items, expenses decreased $40
million or 2.4%. The severance costs relate primarily to simplifying our
management structure across our businesses and within our corporate support
areas by reducing layers and broadening mandates. We anticipate that once the
changes to our structure are complete, annual run-rate savings will exceed the
severance costs.
    Employee costs were higher, due to severance costs in Corporate Services
and higher benefits costs, partially offset by reduced performance-based
costs. There were also increases in deposit insurance costs in the United
States, due to premium increases and business growth, higher capital taxes and
increased premises costs.
    Cash operating leverage was -11.0% in the current quarter.
    Non-interest expense increased $47 million or 2.6% from the first
quarter. The current quarter reflected increases in severance and higher
deposit insurance costs in the United States, while the first quarter included
$45 million of stock-based compensation costs in respect of awards made to
employees eligible to retire and the benefit of a reduction in our Visa
litigation accrual. Adjusting both quarters for severance and deposit
insurance as well as adjusting the first quarter for stock-based compensation
and Visa, our expenses declined quarter over quarter, a key priority for our
business.
    Year to date, non-interest expense increased $435 million or 13% to
$3,729 million. Approximately $400 million of the increase relates to a
stronger U.S. dollar, severance charges including the charge recorded in BMO
Capital Markets in the first quarter, and the impact of operating and
integration costs of new acquisitions.
    Cash operating leverage was -3.5% year to date.

    Risk Management

    Financial markets remained volatile over the past three months, due to
the fallout from the credit market crisis and recession in the global economy.
More recently, turbulence in credit and equity markets has moderated as a
number of economic developments have increased confidence that the deep
recession will be over by the end of the year and the Federal Reserve's stress
tests provided greater clarity as to the financial condition of U.S. banks.
    Specific provisions for credit losses in the current quarter totalled
$372 million, comprised of $127 million in Canada and $245 million in the
United States. Provisions included $41 million for a one-time increase related
to a change in provisioning for the consumer portfolio within P&C Canada.
Specific provisions totalled $151 million in the second quarter of 2008 and
$428 million in the first quarter of 2009. There were no changes in the
general allowance in the current quarter or in the comparative periods. We
remain comfortable with the current level of general allowance.
    BMO employs a methodology for segmented reporting purposes whereby
expected credit losses are charged to the operating groups quarterly based on
their share of expected credit losses over an economic cycle. The difference
between quarterly charges based on expected losses over the credit cycle and
required quarterly provisions based on actual losses is charged (or credited)
to Corporate Services. The following outlines provisions for credit losses
based on actual losses for the quarter.
    In the second quarter of 2009, BMO's $372 million specific provision for
credit losses was comprised of $124 million in P&C Canada (including the $41
million one-time amount noted above), $143 million in P&C U.S. and $105
million in BMO Capital Markets. In the same quarter of 2008, BMO's $151
million specific provision for credit losses was comprised of $89 million in
P&C Canada, $17 million in P&C U.S. and $45 million in BMO Capital Markets. In
the first quarter of 2009, BMO's $428 million specific provision for credit
losses was comprised of $111 million in P&C Canada (including a charge
relating to a credit card fraud), $192 million in P&C U.S. and $125 million in
BMO Capital Markets.
    Specific provisions this quarter represented 79 basis points of average
net loans and acceptances, compared with 90 basis points in the first quarter,
35 basis points a year ago and a 23 basis point average over the past five
years. Effective in the first quarter of 2009, we began reporting credit
statistics on a basis that excludes securities borrowed or purchased under
resale agreements from loans. All comparative figures have been restated.
    Specific provisions for credit losses for the year to date totalled $800
million and there was no change in the general allowance for credit losses. In
the comparable period of 2008, provisions for credit losses totalled $381
million, comprised of $321 million of specific provisions and a $60 million
increase in the general allowance.
    New impaired loan formations totalled $694 million in the quarter, down
from $712 million in the previous quarter but up from $554 million in the same
quarter a year ago. The U.S. commercial real estate and manufacturing sectors
accounted for the majority of second quarter formations. There were sales of
$55 million of impaired loans in the current quarter and no impaired loan
sales in the first quarter of 2009 or second quarter a year ago. Total gross
impaired loans were $2,972 million at the end of the second quarter, up from
$2,666 million at the end of the prior quarter and $2,387 million at the end
of 2008.
    The total allowance for credit losses was $1,825 million, compared with
$1,741 million in the first quarter of 2009, and was comprised of a specific
allowance of $511 million and a general allowance of $1,314 million. The
general allowance is maintained to absorb impairment in the existing credit
portfolio that cannot yet be associated with specific credit assets and is
assessed on a quarterly basis. The general allowance decreased $20 million
from the end of the previous quarter due to the weaker U.S dollar.
    Write-offs reduce impaired loans and allowances as well as the allowance
for credit losses to gross impaired loans ratio. If there were no write-offs
in 2009, gross impaired loans would be $3,754 million and specific allowances
would be $1,293 million.
    BMO's loan book continues to be comprised largely of more stable consumer
and commercial portfolios which, excluding securities borrowed or purchased
under resale agreements, represented 76.1% of the loan portfolio at the end of
the quarter, up from 73.1% in the first quarter but down from 78.7% a year
ago. The variances were mainly due to volume changes in corporate loans.
Approximately 87.8% of the consumer portfolio is comprised of secured loans.
Excluding credit card loans, approximately 89.9% of consumer loans are
secured. In the United States, the consumer portfolio totals US$16.3 billion
and is primarily comprised of three main asset classes: residential first
mortgages (39%), home equity products (32%) and indirect automobile loans
(26%).
    We expect the credit environment to continue to be challenging through
2009 as the global economy remains weak.
    BMO's market risk and liquidity and funding management practices and key
measures are outlined on pages 77 to 82 of BMO's 2008 Annual Report. As
described at the end of fiscal 2008, certain positions were transferred from
our trading portfolio to our available-for-sale portfolio in the fourth
quarter of 2008. These positions, however, remained in our Comprehensive VaR
and Issuer Risk measures throughout the fourth quarter. The removal of these
positions from our Comprehensive VaR and Issuer Risk measures in the first
quarter is the primary reason for the decrease in our Trading and Underwriting
Market Value Exposure (MVE) and Earnings Volatility (EV). The interest rate
risk associated with these positions is captured in our Interest Rate Risk
(accrual) MVE measures. The decreases in MVE and EV over the course of the
second quarter are primarily the result of a lower credit spread environment.
There were no significant changes to our Trading and Underwriting market risk
management practices over the quarter.
    There have been no significant changes to the levels of liquidity and
funding risk over the quarter. We remain satisfied that our liquidity and
funding management framework provides us with a sound position, even in times
of stress.
    There was no significant change in our structural market risk management
practices during the quarter. Structural market earnings risk has increased
from the year end and decreased from the prior quarter, as reflected in the
increase in the 12-month earnings volatility measure in the attached table.
The increase from the year end is attributable to the fact that in the current
lower interest rate environment, further reductions in interest rates would be
expected to lower yields on assets more than rates paid on deposits. The
decrease from the prior quarter is in part owing to the decline of 0.75% in
the Bank of Canada Rate to 0.25%, which lowered the revenue exposure to
further rate declines.
    This Risk Management section and the following Income Taxes section
contain forward-looking statements. Please see the Caution Regarding
Forward-Looking Statements.

    
    Provisions for Credit Losses (PCL)

    (Canadian $ in millions,
     except as noted)        Q2-2009   Q1-2009   Q2-2008  YTD-2009  YTD-2008
    -------------------------------------------------------------------------
    New specific provisions      419       483       201       902       406
    Reversals of previously
     established allowances      (15)      (19)      (15)      (34)      (28)
    Recoveries of loans
     previously written-off      (32)      (36)      (35)      (68)      (57)
    -------------------------------------------------------------------------
    Specific provision for
     credit losses               372       428       151       800       321
    Increase in the general
     allowance                     -         -         -         -        60
    -------------------------------------------------------------------------
    Provision for credit
     losses                      372       428       151       800       381
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Specific PCL as a % of
     average net loans and
     acceptances (annualized)  0.79%     0.90%     0.35%     0.85%     0.38%
    PCL as a % of average net
     loans and acceptances
     (annualized)              0.79%     0.90%     0.35%     0.85%     0.45%



    Changes in Gross Impaired Loans and Acceptances (GIL)

    (Canadian $ in millions,
     except as noted)
    -------------------------------------------------------------------------
    GIL, Beginning of Period   2,666     2,387     1,347     2,387       720
    Additions to impaired
     loans & acceptances         694       712       554     1,406     1,262
    Reductions in impaired
     loans & acceptances(1)      (97)       58        31       (39)       52
    Write-offs                  (291)     (491)     (112)     (782)     (214)
    -------------------------------------------------------------------------
    GIL, End of Period         2,972     2,666     1,820     2,972     1,820
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    GIL as a % of gross
     loans & acceptances       1.64%     1.39%     1.05%     1.64%     1.05%
    GIL as a % of equity and
     allowances for credit
     losses                   12.95%    11.91%     9.54%    12.95%     9.54%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes impaired amounts returned to performing status, loan sales,
        repayments, the impact of foreign exchange fluctuations and offsets
        for consumer write-offs which have not been recognized as formations
        (Q2-09 $150MM; Q1-09 $158MM; and Q2-08 $98MM).



    Aggregate Market Value Exposure and Earnings Volatility for Trading and
    Underwriting and Structural Positions ($ millions)(*)

    (After-tax Canadian           Market value             12-month earnings
     equivalent)                 exposure (MVE)                   volatility
    -------------------------------------------------------------------------
                   Apr. 30   Jan. 31   Oct. 31   Apr. 30   Jan. 31   Oct. 31
                      2009      2009      2008      2009      2009      2008
    -------------------------------------------------------------------------
    Trading and
     Underwriting    (19.1)    (23.5)    (33.4)    (14.9)    (18.1)    (28.7)
    Structural      (295.8)   (276.1)   (267.9)    (61.3)   (100.5)    (30.2)
    -------------------------------------------------------------------------
    BMO Financial
     Group          (314.9)   (299.6)   (301.3)    (76.2)   (118.6)    (58.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Measured at a 99% confidence interval. Losses are in brackets.



    Total Trading and Underwriting MVE Summary ($ millions)(*)

                                                             As at     As at
                                   For the quarter ended   January   October
    (Pre-tax                              April 30, 2009  31, 2009  31, 2008
     Canadian      Quarter-                                Quarter-  Quarter-
     equivalent)       end   Average      High       Low       end       end
    ----------------------------------------------------- --------- ---------
    Commodities
     Risk             (0.5)     (0.5)     (0.8)     (0.4)     (0.4)     (0.9)
    Equity Risk       (9.2)     (8.6)    (11.8)     (6.2)     (9.6)     (7.3)
    Foreign
     Exchange Risk    (3.8)     (6.7)     (8.2)     (3.8)     (6.3)     (1.4)
    Interest Rate
     Risk (Mark-to-
     Market) (1)     (13.0)    (16.1)    (22.8)    (13.0)    (16.1)    (30.6)
    Diversifica-
     tion (2)          8.2      10.1         nm        nm     10.7       6.4
    ----------------------------------------------------- --------- ---------
    Comprehensive
     Risk            (18.3)    (21.8)    (27.0)    (18.3)    (21.7)    (33.8)
    Interest Rate
     Risk (accrual)   (8.0)     (8.8)    (12.3)     (7.1)     (9.8)    (11.6)
    Issuer Risk       (3.1)     (4.4)     (9.5)     (3.1)     (4.7)     (6.1)
    ----------------------------------------------------- --------- ---------
    Total MVE        (29.4)    (35.0)    (41.0)    (29.4)    (36.2)    (51.5)
    ----------------------------------------------------- --------- ---------
    ----------------------------------------------------- --------- ---------
    nm - not meaningful
    (*)  One-day measure using a 99% confidence interval. Losses are in
         brackets and benefits are presented as positive numbers.
    (1)  In 2009, measures exclude securities transferred to the available-
         for-sale portfolio in the fourth quarter of 2008.
    (2)  Computation of a diversification effect for the high and low is not
         meaningful.



    Structural Balance Sheet Earnings and Value Sensitivity to Changes in
    Interest Rates ($ millions)(*)


    (After-tax Canadian         Economic value     Earnings sensitivity over
     equivalent)                   sensitivity            the next 12 months
    -------------------------------------------------------------------------
                   Apr. 30   Jan. 31   Oct. 31   Apr. 30   Jan. 31   Oct. 31
                      2009      2009      2008      2009      2009      2008
    -------------------------------------------------------------------------
    100 basis point
     increase       (223.3)   (222.7)   (220.8)     12.6      10.6      (4.4)
    100 basis point
     decrease        232.9     220.8     169.2     (59.6)    (22.1)    (21.0)

    200 basis point
     increase       (471.8)   (472.3)   (488.6)      3.7       5.4     (16.2)
    200 basis point
     decrease        380.8     417.9     328.4    (121.9)   (123.3)   (177.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Losses are in brackets and benefits are presented as positive
        numbers.
    

    Income Taxes

    As explained in the Revenue section, management assesses BMO's
consolidated results and associated provisions for income taxes on a GAAP
basis. We assess the performance of the operating groups and associated income
taxes on a taxable equivalent basis and report accordingly.
    The provision for income taxes decreased $110 million from the second
quarter of 2008 and increased $89 million from the first quarter of 2009, to
$18 million. The effective tax rate for the quarter was 4.4%, compared with
16.3% in the second quarter of 2008 and a recovery rate of 41.0% in the first
quarter of 2009. The income tax expense for the year to date 2009 as compared
to 2008 decreased $90 million to a recovery of $53 million, resulting in a
recovery rate of 9.4% year to date. This compares to a tax expense of $37
million resulting in an effective tax rate of 3.8% for the same period last
year.
    Excluding the impact of capital markets environment charges and the
severance costs, the adjusted effective tax rate for the quarter was 14.8%,
compared with 14.0% in the first quarter of 2009 and 15.3% in the second
quarter of 2008. These changes in the adjusted effective tax rate for the
quarter were primarily due to a lower proportion of income from lower-tax-rate
jurisdictions, offset by higher tax exempt income.
    BMO hedges the foreign exchange risk arising from its investments in U.S.
operations by funding the investments in U.S. dollars. Under this program, the
gain or loss from hedging and the unrealized gain or loss from translation of
the investments in U.S. operations are charged or credited to shareholders'
equity. For income tax purposes, the gain or loss on the hedging activities
attracts an income tax charge or credit in the current period, which is
charged or credited to shareholders' equity, while the associated unrealized
gain or loss on the investments in U.S. operations does not attract income
taxes until the investments are liquidated. The income tax charge/benefit
arising from a hedging gain/loss is a function of the fluctuation in U.S.
rates from period to period. Hedging of the investments in U.S. operations has
given rise to income tax charges in shareholders' equity of $104 million for
the quarter and $38 million for the year to date. Refer to the Consolidated
Statement of Changes in Shareholders' Equity included in the unaudited
consolidated financial statements for further details.

    
    Summary Quarterly Results Trends

    (Canadian $ in millions,
     except as noted)                  Q2-2009   Q1-2009   Q4-2008   Q3-2008
    -------------------------------------------------------------------------
    Total revenue                        2,655     2,442     2,813     2,746
    Provision for credit losses
     - specific                            372       428       315       434
    Provision for credit losses
     - general                               -         -       150        50
    Non-interest expense                 1,888     1,841     1,818     1,782
    Net income                             358       225       560       521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          0.61      0.39      1.06      1.00
    Diluted earnings per share ($)        0.61      0.39      1.06      0.98
    Net interest margin on earning
     assets (%)                           1.55      1.51      1.71      1.59
    Effective income tax rate (%)          4.4     (41.0)     (9.2)    (12.2)
    Canadian/U.S. dollar exchange
     rate (average)                       1.24      1.23      1.11      1.01

    Net income:
      P&C Canada                           350       325       333       331
      P&C U.S.                              25        34        12        28
    -------------------------------------------------------------------------
    Personal and Commercial Banking        375       359       345       359
    Private Client Group                    62        57        75       108
    BMO Capital Markets                    249       179       290       263
    Corporate Services, including T&O     (328)     (370)     (150)     (209)
    -------------------------------------------------------------------------
    BMO Financial Group                    358       225       560       521
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in millions,
     except as noted)                  Q2-2008   Q1-2008   Q4-2007   Q3-2007
    -------------------------------------------------------------------------
    Total revenue                        2,620     2,026     2,200     2,555
    Provision for credit losses
     - specific                            151       170       101        91
    Provision for credit losses
     - general                               -        60        50         -
    Non-interest expense                 1,680     1,614     1,655     1,659
    Net income                             642       255       452       660
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          1.25      0.48      0.89      1.30
    Diluted earnings per share ($)        1.25      0.47      0.87      1.28
    Net interest margin on earning
     assets (%)                           1.48      1.45      1.47      1.61
    Effective income tax rate (%)         16.3     (50.3)    (19.3)     15.7
    Canadian/U.S. dollar exchange
     rate (average)                       1.01      1.00      1.00      1.07

    Net income:
      P&C Canada                           320       291       293       361
      P&C U.S.                              30        26        33        25
    -------------------------------------------------------------------------
    Personal and Commercial Banking        350       317       326       386
    Private Client Group                   107        96       101        99
    BMO Capital Markets                    187       (29)       46       194
    Corporate Services, including T&O       (2)     (129)      (21)      (19)
    -------------------------------------------------------------------------
    BMO Financial Group                    642       255       452       660
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    BMO's quarterly earning trends were reviewed in detail on pages 87 and 88
of the 2008 Annual Report. Readers are encouraged to refer to that review for
a more complete discussion of trends and factors affecting past quarterly
results including the modest impact of seasonal variations in results. The
above table outlines summary results for the third quarter of fiscal 2007
through the second quarter of fiscal 2009.
    Notable items have affected revenues in BMO Capital Markets. There were
commodities losses of $149 million in the third quarter of 2007 with smaller
losses in 2008 as the size and risk of the portfolio was reduced. The fourth
quarter of 2007 through second quarter of 2009 reflected charges related to
the effects of the capital markets environment. The charges were largely
reflected in BMO Capital Markets and amounted to $318 million, $488 million,
($42 million), $134 million, $45 million, $528 million and $117 million,
respectively. BMO Capital Markets other businesses that were not affected by
notable items performed very strongly over the course of 2007 but market
conditions were softer in 2008 with improvement in the first and second
quarters of 2009.
    P&C Canada has continued to benefit from strong volume growth over 2008
and into 2009, with favourable movements in market share in a number of key
businesses and improvements in personal loyalty scores. P&C U.S. has operated
in a difficult business environment over the past year and results in 2008 and
2009 have increasingly been impacted by the effects of the credit environment,
which lowers revenues and increases expenses. The net income impact of this
was US$22 million in fiscal 2008 and US$22 million for the current year to
date. Its results in the fourth quarter of 2008 were affected by the
completion of the integration of the Wisconsin acquisitions.
    Private Client Group results reflected stable earnings until the fourth
quarter of 2008 when revenue growth slowed on significantly lower managed and
administered assets amid challenging market conditions. Asset levels have
remained low in the first two quarters of 2009. Charges in respect of actions
taken to support U.S. clients in the weak capital markets environment lowered
results in the fourth quarter of 2008 and first quarter of 2009. Corporate
Services results reflect increased provisions for credit losses because of
BMO's allocation of provisions on an expected loss basis. Results in 2009 have
also been affected by low revenues as explained in the Corporate Services
section and results reflected severance costs of $118 million in the most
recent quarter.
    Provisions for credit losses are higher as economic conditions have
softened from the particularly favourable credit environment of past years.
    The U.S. dollar strengthened late in 2008 and especially in the first
quarter of 2009, after having weakened over the course of past years. A
stronger U.S. dollar raises the translated values of BMO's
U.S.-dollar-denominated revenues and expenses.

    Balance Sheet

    Total assets of $432.2 billion increased $16.2 billion from October 31,
2008, net of the impact of a weaker U.S. dollar that decreased the translated
value of U.S.-denominated assets by $1.3 billion. The $16.2 billion increase
primarily reflects growth in derivative assets of $11.9 billion, securities
borrowed or purchased under resale agreements of $10.5 billion and securities
of $7.4 billion, partially offset by a decrease in net loans and acceptances
of $7.3 billion and lower cash balances of $6.9 billion.
    The $11.9 billion increase in derivative financial assets was primarily
in interest rate contracts, due to the effects of movements in and volatility
of interest rates, partially offset by a decrease in foreign exchange and
equity contracts. Similar movements were observed in derivative financial
liabilities.
    The growth in securities borrowed or purchased under resale agreements of
$10.5 billion and the decline in cash resources of $6.9 billion are both
explained by increased client preference for securities sold under repurchase
agreements. The decrease in net loans and acceptances of $7.3 billion was due
to a decrease in loans to businesses and governments of $6.9 billion and a
decrease in residential mortgages of $1.2 billion primarily due to
securitization activity.
    The $6.9 billion decrease in cash resources was largely attributable to
movement in corporate clients' deposits as the market environment stabilized
and they have invested in securities borrowed or purchased under resale
agreements as noted above.
    Liabilities and shareholders' equity increased $16.2 billion from October
31, 2008 including a $1.3 billion decrease due to the effects of the weaker
U.S. dollar. The $16.2 billion increase primarily reflects growth in
derivative financial liabilities of $15.0 billion, securities lent or sold
under repurchase agreements of $13.7 billion and shareholders' equity of $1.8
billion, partially offset by a decrease in deposits of $10.5 billion and
securities sold but not yet purchased of $4.7 billion.
    Deposits by businesses and governments, which account for 48% or $118.2
billion of total deposits, decreased $17.9 billion, driven largely by U.S.
corporate clients shifting their demand deposits to higher yielding securities
sold under repurchase agreements, which increased $13.7 billion. These client
deposits had been invested on a short-term basis with the U.S. Federal
Reserve. Deposits by banks, which account for 11% or $27.9 billion of total
deposits, decreased $2.5 billion. Deposits from individuals, which account for
the remaining 41% or $101.1 billion of total deposits, increased $9.9 billion,
primarily in fixed-term and notice deposits and were used to reduce deposits
from businesses. The proceeds of the net increase in securities lent or sold
under repurchase agreements and securities sold but not yet purchased were
used in trading activities.
    The increase in shareholders' equity of $1.8 billion reflects $1.0
billion raised by the issuance of 33.3 million common shares and the net
issuance of $0.4 billion in preferred shares.

    Capital Management

    At April 30, 2009, BMO's Tier 1 Capital Ratio was 10.70%, with Tier 1
capital of $19.7 billion and risk-weighted assets (RWA) of $184.6 billion. The
ratio remains strong, increasing 93 basis points from 9.77% as at October 31,
2008. The increase was due to both growth in capital and lower RWA, partially
offset by the impact of the closing of the BMO Life Assurance acquisition on
April 1, 2009.
    Tier 1 capital increased primarily as a result of the capital issuance
completed in the first quarter and the impact of the $275 million of 6.50%
Preferred Shares Series 21 issued on March 20, 2009. The increase was
partially offset by an increase in certain Basel II deductions and the impact
of a new Basel II requirement we adopted on November 1, 2008, whereby
investments in non-consolidated entities and substantial investments,
excluding insurance subsidiaries held prior to January 1, 2007, are deducted
50% from Tier 1 capital and 50% from Tier 2 capital. The bank's incremental
investment in its insurance subsidiary, to support the insurance company
acquisition, is also deducted 50% from Tier 1 capital and 50% from Tier 2
capital. Previously these deductions were taken from Tier 2 capital.
    RWA decreased $7 billion from October 31, 2008 primarily due to lower
market risk RWA and lower credit risk RWA in the loan and trading portfolios.
It was partially offset by an increase in securitization RWA. Basel II credit
risk RWA will change with the underlying economic environment. We would
anticipate credit risk RWA increasing from current levels through the
remainder of the year, given the current economic outlook.
    BMO's Total Capital Ratio was 13.20% at April 30, 2009. The ratio
increased 103 basis points from 12.17% at October 31, 2008. BMO's Tangible
Common Equity to RWA Ratio was 8.24%, up from 7.47% at October 31, 2008, and
is strong relative to our Canadian and international peer groups.
    During the quarter, 4,309,000 shares were issued due to the exercise of
stock options, share exchanges and the Dividend Reinvestment and Share
Purchase Plan. We did not repurchase any Bank of Montreal common shares under
our common share repurchase program during the quarter.
    On May 26, 2009, BMO's Board of Directors declared a quarterly dividend
payable to common shareholders of $0.70 per share, unchanged from a year ago
and from the preceding quarter. The dividend is payable August 27, 2009 to
shareholders of record on August 7, 2009. Common shareholders who, in lieu of
cash, elect to have this dividend reinvested in additional common shares under
BMO's Shareholder Dividend Reinvestment and Share Purchase Plan, will receive
a two per cent discount from the average market price of the common shares (as
defined in the plan).

    Qualifying Regulatory Capital

    
    Basel II Regulatory Capital and Risk-Weighted Assets

    (Canadian $ in millions)                               Q2 2009   Q4 2008
    -------------------------------------------------------------------------
    Common shareholders' equity                             16,911    15,974
    Non-cumulative preferred shares                          2,171     1,996
    Innovative Tier 1 Capital Instruments                    2,933     2,486
    Non-controlling interest in subsidiaries                    29        39
    Goodwill and excess intangible assets                   (1,670)   (1,635)
    Accumulated net after-tax unrealized losses from
     available-for-sale equity securities                      (34)      (15)
    -------------------------------------------------------------------------
    Net Tier 1 Capital                                      20,340    18,845
    Securitization-related deductions                         (173)     (115)
    Expected loss in excess of allowance - AIRB approach       (56)        -
    Substantial investments                                   (366)        -
    Other deductions                                             -        (1)
    -------------------------------------------------------------------------
    Adjusted Tier 1 Capital                                 19,745    18,729
    -------------------------------------------------------------------------
    Subordinated debt                                        4,379     4,175
    Trust subordinated notes                                   800       800
    Accumulated net after-tax unrealized gain from
     available-for-sale equity securities                        -         -
    Eligible general allowance for credit losses               310       494
    -------------------------------------------------------------------------
    Total Tier 2 Capital                                     5,489     5,469
    Securitization-related deductions                           (9)       (6)
    Expected loss in excess of allowance - AIRB approach       (55)        -
    Substantial investments/investment in insurance
     subsidiaries                                             (796)     (871)
    Other deductions                                             -         -
    -------------------------------------------------------------------------
    Adjusted Tier 2 Capital                                  4,629     4,592
    -------------------------------------------------------------------------
    Total Capital                                           24,374    23,321
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Risk-Weighted Assets (RWA)

    (Canadian $ in millions)                               Q2 2009   Q4 2008
    -------------------------------------------------------------------------
    Credit risk                                            159,554   163,616
    Market risk                                              8,157    11,293
    Operational risk                                        16,895    16,699
    -------------------------------------------------------------------------
    Total risk-weighted assets                             184,606   191,608
    Regulatory floor                                             -         -
    -------------------------------------------------------------------------
    Total Transitional Risk-Weighted Assets                184,606   191,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Outstanding Shares and Securities Convertible into Common Shares

                                                         Number of shares or
    As of May 21, 2009                                Canadian dollar amount
    -------------------------------------------------------------------------
    Common shares                                                545,116,000
    Class B Preferred Shares
      Series 5                                                $  200,000,000
      Series 13                                               $  350,000,000
      Series 14                                               $  250,000,000
      Series 15                                               $  250,000,000
      Series 16                                               $  300,000,000
      Series 18 (note 1)                                      $  150,000,000
      Series 21 (note 1)                                      $  275,000,000
    Convertible into common shares:
    Class B Preferred Shares
      Series 10                                               $  396,000,000
    Stock options
      - vested                                                    13,841,000
      - non-vested                                                 7,035,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Details on share capital are outlined in Notes 21 and 23 to the audited
    financial statements on pages 135 to 137 and the table on page 62 in the
    Annual MD&A included in the 2008 Annual Report.

    Note 1: No Series 17, 19 or 20 shares have been issued.
    

    Eligible Dividends Designation

    For the purposes of the Income Tax Act (Canada) and any similar
provincial and territorial legislation, BMO designates all dividends paid on
both its common and preferred shares after December 31, 2005, and all
dividends (including deemed dividends) paid thereafter, as "eligible
dividends" unless BMO indicates otherwise.

    Credit Rating

    BMO's senior debt credit ratings remain unchanged with a stable outlook.
All four ratings are indicative of high-grade, high-quality issues. They
remain: DBRS (AA); Fitch (AA-); Moody's (Aa1); and Standard & Poor's (A+).

    Transactions with Related Parties

    In the ordinary course of business, we provide banking services to our
directors and executives and their affiliated entities, joint ventures and
equity-accounted investees on the same terms that we offer our customers. A
select suite of customer loan and mortgage products is offered to our
employees at rates normally accorded to our preferred customers. We also offer
employees a fee-based subsidy on annual credit card fees.
    Stock options and deferred share units granted to directors and preferred
rate loan agreements for executives, relating to transfers we initiate, are
both discussed in Note 28 of the audited consolidated financial statements on
page 146 of the 2008 Annual Report.

    Off-Balance-Sheet Arrangements

    BMO enters into a number of off-balance-sheet arrangements in the normal
course of operations. The most significant off-balance sheet arrangements that
we enter into are credit instruments and VIEs, which are described on page 68
of the 2008 Annual Report and in Notes 5 and 7 to the unaudited consolidated
financial statements. See the Financial Instruments in the Difficult Credit
Environment section for changes to our off-balance-sheet arrangements during
the three months ended April 30, 2009.

    Accounting Policies and Critical Accounting Estimates

    The notes to BMO's October 31, 2008 audited consolidated financial
statements outline our significant accounting policies.
    Pages 69 to 71 of the 2008 Annual Report contain a discussion of certain
accounting estimates that are considered particularly important as they
require management to make significant judgments, some of which relate to
matters that are inherently uncertain. Readers are encouraged to refer to the
2008 Annual Report to review that discussion.

    Accounting Changes

    Goodwill and Intangible Assets

    On November 1, 2008, BMO adopted the CICA's new accounting requirements
for goodwill and intangible assets. We have restated prior periods' financial
statements for this change. New rules required us to reclassify certain
computer software from premises and equipment to intangible assets. The impact
of implementation of this standard was not material to our results of
operations or financial position and had no impact on net income. See Note 2
to the unaudited consolidated financial statements.

    Transition to International Financial Reporting Standards

    Canadian public companies will be required to prepare their financial
statements in accordance with International Financial Reporting Standards
(IFRS), as issued by the International Accounting Standards Board, for
financial years beginning on or after January 1, 2011. Effective November 1,
2011, we will adopt IFRS as the basis for preparing our consolidated financial
statements.
    Due to anticipated changes in IFRS prior to transition, we are not in a
position to determine the impact on our financial results at this time.
    Our transition plan to meet the requirements of IFRS remains on track.
Page 71 of our 2008 Annual Report contains a discussion of the key elements of
our transition plan and readers are encouraged to refer to the 2008 Annual
Report to review that discussion.

    Financial Instruments in the Difficult Credit Environment

    Pages 62 to 67 of BMO's 2008 annual report provided enhanced disclosure
related to financial instruments that, effective in 2008, markets started to
consider to be carrying higher risk. Readers are encouraged to review that
disclosure to assist in understanding the nature of BMO's exposures at April
30, 2009 that are discussed in the sections that follow.

    Consumer Loans

    In the United States, the consumer portfolio totals US$16.3 billion and
is primarily comprised of three asset classes: residential first mortgages
(39%), home equity products (32%) and indirect automobile loans (26%). The
balance of the U.S. portfolio includes our limited exposure to other retail
lending products including a nominal US$1 million of credit card loans that
relate to the Wisconsin acquisitions.
    In Canada, the consumer portfolio totals $72.5 billion and is also
comprised of three main asset classes: residential mortgages (52%), instalment
and other personal loans (45%) and credit card loans (3%).
    The sections below discuss subprime mortgage loans, Alt-A mortgage loans
and home equity products, portfolios that are of increased investor interest
in today's environment.

    Subprime First Mortgage Loans

    In the United States, we have US$0.28 billion (US$0.25 billion at October
31, 2008) of first mortgage loans that had subprime characteristics at the
date of authorization. A small portion of the above is in respect of uninsured
loans with a loan-to-value ratio above 80% at issuance. A modest $10.4 million
or 3.67% ($5.4 million or 2.14% at October 31, 2008) of the portfolio was 90
days or more in arrears. This compares with a rate of 1.81% on BMO's total
U.S. first mortgage loan portfolio.
    BMO also has net exposure of US$129 million (US$159 million at October
31, 2008) to a business that purchased distressed mortgages (including
subprime mortgages) at a discounted price.
    In Canada, BMO does not have any subprime mortgage programs. BMO mortgage
lending decisions incorporate a full assessment of the customer and loan
structure. Credit score is only one component of the adjudication process and
consequently we do not categorize loans based upon credit scores alone.

    Alt-A First Mortgage Loans

    In the United States, Alt-A loans are generally considered to be loans
for which borrower qualifications are subject to limited verification. The
U.S. loan portfolio had two loan programs that met this definition - our Easy
Doc and No Doc programs. The programs were discontinued in the third quarter
of 2008. Loans under the No Doc program, which comprise most of the exposure
in this class, required strong minimum credit bureau scores of 660 and strong
maximum loan-to-value ratios of 80% (90% with private mortgage insurance). Due
to these lending requirements, the credit quality of our Alt-A portfolio is
strong and the loans have performed well. In the United States, our direct
Alt-A loans totalled US$1.4 billion (US$1.6 billion at October 31, 2008). Of
this, $45 million or 3.09% was 90 days or more in arrears at April 30, 2009
($10 million or 0.62% at October 31, 2008).
    In Canada, we do not have a mortgage program that we consider Alt-A. In
the past, we may have chosen to not verify income or employment for certain
customers where there were other strong characteristics supporting the credit
worthiness of a loan as part of our credit adjudication process; however, this
approach is no longer in use. Our Newcomers to Canada/non-resident mortgage
program permits limited income verification but has other strong qualification
criteria. There was approximately $2.4 billion ($2.2 billion at October 31,
2008) outstanding under this program. Of this, only $19 million or 0.79% was
90 days or more in arrears ($11 million or 0.51% at October 31, 2008),
reflecting the strong credit quality of these loans.

    Home Equity Products

    In the United States, we have a US$5.2 billion home equity loan
portfolio, which amounted to 3.0% of BMO's total loan portfolio as of April
30, 2009. Of the total portfolio, loans of US$305 million (US$300 million at
October 31, 2008) were extended to customers with original credit bureau
scores of less than 620, and would be categorized as subprime loans (US$549
million authorized) if included in the mortgage portfolio. Of this amount,
only US$4 million or 1.28% was 90 days or more in arrears (US$2 million and
0.81% at October 31, 2008).
    BMO also offered loans under two limited documentation programs within
the home equity portfolio in the United States that would be categorized as
Alt-A if they were in the first mortgage loans portfolio. The amount
authorized under these programs was US$1.0 billion and US$0.6 billion was
outstanding. Loans made under these programs have the same strong credit score
and loan-to-value requirements as the first mortgage portfolio and, as such,
the portfolio has performed well. As at April 30, 2009, US$5 million or 0.82%
of the portfolio was greater than 90 days in arrears, little changed from
October 31, 2008. This compares with a rate of 0.95% (0.57% at October 31,
2008) for BMO's total U.S. home equity loan portfolio. We discontinued
offering these programs in the third quarter of 2008.
    We also consider home equity loans to customers with credit bureau scores
above 620 but below 660 to be a higher-risk component of the loan portfolio.
This component of the portfolio was US$0.3 billion and US$4 million or 1.35%
of these loans were greater than 90 days in arrears (US$3 million and 0.90% at
October 31, 2008).
    Loans having a loan-to-value ratio higher than 90% at issuance represent
US$0.3 billion or 6.4% of the U.S. home equity loan portfolio and loans having
a loan-to-value ratio higher than 80% to customers with a credit bureau score
below 660 at the time of issuance also represent just US$0.3 billion of the
portfolio.
    In Canada, we have a $14.9 billion ($13.8 billion at October 31, 2008)
home equity line of credit portfolio. Authorized amounts total $26.9 billion
($25.4 billion at October 31, 2008). Home equity loans generally do not exceed
loan-to-value ratios of 80% at issuance. The home equity line of credit
portfolio is high-quality, with only 0.13% of the loans in the portfolio in
arrears 90 days or more (0.08% at October 31, 2008). Of these lines of credit,
one product line is offered only in first mortgage position and represents
approximately 56% of the total portfolio. The others include a blend of first
mortgage and subordinate positions. We also have a $0.3 billion home equity
instalment loan portfolio on which $2 million of loans are in arrears 90 days
or more.

    Leveraged Finance

    Leveraged finance loans are defined by BMO as loans to private equity
businesses and mezzanine financings where our assessment indicates a higher
level of credit risk. BMO has limited exposure to leveraged finance loans,
representing less than 1% of our total assets, with $3.4 billion outstanding
as at April 30, 2009 ($5.5 billion authorized), compared with $3.6 billion
outstanding ($5.8 billion authorized) at October 31, 2008. Of this amount,
$289 million or 8.4% was considered impaired ($234.1 million and 6.5% at
October 31, 2008).

    Monoline Insurers and Credit Derivative Product Companies

    BMO's direct exposure to companies that specialize in providing default
protection amounted to $496 million ($573 million at October 31, 2008) in
respect of the mark-to-market value of counterparty derivatives and $28
million ($19 million at October 31, 2008) in respect of the mark-to-market
value of traded credits. The cumulative adjustment for counterparty credit
risk recorded against these exposures was $91 million at April 30, 2009 ($104
million at January 31, 2009 and $60 million at October 31, 2008).
    Approximately 54% of the $496 million (88% of $573 million at October 31,
2008) exposure is related to counterparties rated AA or better by S&P. The
remainder also relates to counterparties rated investment grade by S&P.
Moody's credit ratings are lower. Approximately 54% of the $28 million
exposure to traded credits is related to counterparties rated BBB- or better.
The notional value of direct contracts involving monoline insurers and credit
derivative product companies was approximately $4.1 billion (approximately
$4.5 billion at October 31, 2008). Most contracts with these companies relate
to collateralized debt obligations and credit default swaps within our trading
portfolio and provide protection against losses arising from defaults. These
instruments have minimal subprime exposure.
    Two credit derivative product companies that provide default protection
to us on certain positions were downgraded in the second quarter. One of the
companies, whose counterparty credit rating was downgraded by Moody's from
Baa1 to Ba1, provides us with credit protection on derivatives also that have
a mark-to-market value of US$160 million and we have also recorded a credit
valuation adjustment of US$31 million on our exposure to this company. The
second company's subordinated notes were downgraded by Moody's from Aaa to
Caa1. This company provides us with credit protection on derivatives that have
a mark-to-market value of US$133 million and we have also recorded a credit
valuation adjustment of US$45 million on our exposure to this company. The
underlying security on the two exposures consists of three pools of
broadly-diversified single name corporate and sovereign credits. Each of the
pools has from 95 to 138 credits of which 65% to 81% are investment grade with
first-loss protection that ranges from 8.2% to 19.2%.
    BMO also held $1,106 million ($1,176 million at October 31, 2008) of
securities insured by monoline insurers, of which $761 million were municipal
bonds. Approximately 95% (approximately 79% at October 31, 2008) of the
municipal bond portfolio is rated investment grade, including the benefits of
the insurance guarantees. Approximately 77% (approximately 68% at October 31,
2008) of the municipal bond holdings have ratings exclusive of the insurance
guarantees and all of those are rated investment grade.

    BMO-Sponsored Canadian Securitization Vehicles

    BMO sponsors various Canadian securitization vehicles that fund assets
originated by either BMO or its customers. Of those that fund bank originated
assets, two hold Canadian residential mortgage loans transferred from BMO
while the third holds credit card loans transferred from BMO. BMO's investment
in the asset-backed commercial paper of the two residential mortgage vehicles
totalled $250 million ($509 million at October 31, 2008). BMO provides $5.1
billion in liquidity facilities to these vehicles and no amounts have been
drawn on the facilities. The credit card securitization vehicle issues only
term asset-backed securities and does not issue asset-backed commercial paper
("ABCP"). As a result, we do not provide any liquidity facilities to this
vehicle. We hold $269 million of subordinated notes issued by the credit card
securitization vehicle ($263 million at October 31, 2008). Notes issued
pursuant to the mortgage programs are rated R-1 (high) by DBRS and Prime-1 by
Moody's. The senior notes issued pursuant to the credit card programs are
rated AAA by DBRS and Aaa by Moody's.
    We also sponsor customer securitization vehicles in Canada that provide
customers with financing. These vehicles hold assets transferred by our
customers. Some customer securitization vehicles are funded directly by BMO
and others are funded in the market. We directly fund customer securitization
vehicles holding $217 million of assets, including exposure to $48 million of
Canadian residential mortgage loans with subprime or Alt-A characteristics.
Subsequent to quarter end, the bank increased its direct funding of customer
securitization vehicles by an additional $1 billion through its refinancing of
two formerly market funded auto receivables programs.
    Notes issued by the market funded customer securitization vehicles are
rated R-1 (high) by DBRS and Prime-1 by Moody's and account for $8.7 billion
($11.0 billion at October 31, 2008) of BMO's liquidity support facility, which
remains undrawn. The assets of each of these market funded customer
securitization vehicles consist primarily of diversified pools of Canadian
auto receivables and Canadian residential mortgages. These asset classes,
combined, account for 75% of the aggregate assets of these vehicles. Their
assets include $581 million of Canadian residential mortgage loans with
subprime or Alt-A characteristics. There are no collateralized debt
obligations (CDOs) and no exposure to monoline insurers in these vehicles.
    BMO's ABCP holdings of the market funded customer securitization vehicles
totalled $1.2 billion at April 30, 2009 ($2.6 billion at October 31, 2008), of
which a substantial amount reflects BMO's decision to invest a portion of its
excess structural liquidity in ABCP. No losses have been recorded on BMO's
investment in the ABCP of these vehicles.

    BMO-Sponsored U.S. Securitization Vehicle

    BMO provides committed liquidity support facilities of US$6.6 billion
(US$8.2 billion at October 31, 2008) to our U.S. multi-seller ABCP vehicle.
    Approximately 53% of the vehicle's commitments have been rated by Moody's
or S&P, and virtually all are rated investment grade, with 82% rated A or
higher by Moody's and virtually 100% rated A or higher by S&P. Approximately
US$1.3 billion of the commitments are insured by monolines, primarily MBIA and
Ambac.
    The vehicle has US$5.4 billion of commercial paper outstanding (US$6.5
billion at October 31, 2008). The ABCP of the conduit is rated A1 by S&P and
P1 by Moody's. BMO has not invested in the conduit's ABCP. Outstanding
commercial paper has consistently been purchased by third-party investors,
notwithstanding market disruptions, and pricing levels are in line with those
of top-tier ABCP conduits in the United States.

    Credit Protection Vehicle

    We also sponsor Apex Trust (Apex), a Canadian special purpose vehicle
that provides credit protection via credit default swaps through 12 leveraged
super-senior tranches of diversified pools of U.S. and European corporate
credits. Apex has exposure to approximately 450 corporate credits that are
diversified by geographic region and industry. Approximately 71% of the
corporate credits are rated investment grade (25% rated higher than BBB, 46%
rated BBB and 29% rated below investment grade). A significant portion of the
corporate credits within each of the 12 tranches is rated investment grade,
ranging from a low of 64% to a high of 79%. A number of the ratings on the
underlying companies are on watch or under review for downgrade.
    Apex has issued $2.2 billion of medium-term notes with terms of five and
eight years (the "Notes"), of which BMO's exposure is $815 million. Another
party has a $600 million exposure to the Notes through a total return swap
with BMO. The total return swap had a price reset in September, 2009 based on
a reference index and BMO had the sole option to terminate the swap at that
time. In the second quarter, the total return swap was restructured to remove
the option to terminate and replace the price reset feature with a fixed cost.
The $600 million of Notes are now hedged for their full term until maturity.
    A senior funding facility of $1.13 billion (the "Senior Facility") has
been made available to Apex, with BMO providing $1.03 billion of that
facility. Advances under the Senior Facility rank senior to the Notes. As of
April 30, 2009, $632 million ($941 million at January 31, 2009 and $553
million at October 31, 2008) had been advanced through BMO's committed share
of the Senior Facility to fund collateral calls arising from changes in
mark-to-market values of the underlying credit default swaps. The Notes and
the Senior Facility total approximately $3.3 billion and represent about 16%
of the approximately $21.3 billion of net notional credit positions held by
the vehicle.
    BMO has entered into credit default swap contracts on the net notional
positions with the swap counterparties and into offsetting swaps with Apex. As
a result, BMO also has exposure if losses exceed the aggregate $3.3 billion
value of the Notes and the Senior Facility.
    In the second quarter we recorded charges of $215 million comprising a
charge of $41 million of unrealized mark-to-market losses on our Notes
exposure, reducing the carrying value of our $815 million of Notes to $407
million ($448 million at January 31, 2009 and $625 million at October 31,
2008), and a charge of $174 million in connection with the renegotiation of
the total return swap (TRS) on $600 million of Notes. The $174 million
one-time charge comprises $78 million related to the write-off of the asset
value on the original TRS and $96 million related to restructuring the TRS to
match the maturity of the Notes at a fixed price. By restructuring the TRS, we
have eliminated the price reset risk and significantly reduced the earnings
volatility associated with the TRS transaction. In the first quarter, we
recorded a total charge of $248 million consisting of a charge of $177 million
on our Notes exposure and an additional $71 million charge in relation to the
total return swap transaction. The decline in fair value in 2009 resulted from
deterioration in the credit quality of the underlying portfolios and increases
in credit spreads given current market conditions. As a result of new guidance
issued by the Canadian Institute of Chartered Accountants, we transferred our
$815 million of Notes from available-for-sale securities to trading securities
in the second quarter.
    Realized credit losses on the Apex Notes will only be incurred should
losses on defaults in the underlying credits exceed the first-loss protection
on a tranche. A significant majority of Apex's positions benefit from
substantial first-loss protection. The lowest level of first-loss protection
is an estimated 2.9% (an estimated 5.7% at January 31, 2009 and 7.0% at
October 31, 2008) on a tranche with a notional amount of $875 million,
representing effective exposure to BMO of $324 million (based on BMO's
exposure to $815 million of the $2.2 billion of medium-term notes
outstanding). Its rating was downgraded to CCC in the quarter and on May 5th
was placed under review with negative implications. The second lowest level of
first-loss protection is an estimated 10.4% (unchanged from January 31, 2009
and down from an estimated 11.2% at October 31, 2008) on a tranche with a
notional amount of $342 million, representing effective exposure to BMO of
$126 million. Its rating was downgraded to BB (low) in the quarter. Each of
the other 10 tranches has first-loss protection ranging from 13.5% to 29.4%
(13.7% to 29.7% at January 31, 2009 and 14.4% to 30.3% at October 31, 2008)
with a weighted average of 23.7%, essentially unchanged from January 31, 2009.
Each of the ten tranches was rated A (low) or above (January 31, 2009 AAA)
with seven of the tranches representing net notional credits of $17.4 billion
continuing to be AAA rated. This substantial first loss protection from future
defaults on these ten tranches is significantly higher than the historical
credit loss experience of similarly-rated corporate credits. The third lowest
level of first-loss protection is an estimated 13.53%. Seven of the tranches
representing approximately $8.0 billion of net notional credits have ratings
of A (low) to AAA and first-loss protection of approximately 13.53% to 15.0%.
The remaining three tranches, representing approximately $12.1 billion of net
notional credits, have ratings of AAA and first-loss protection of
approximately 24.1% to 29.4%.
    If losses were realized on the full notional amounts of $1,217 million
represented by the two tranches with the lowest levels of first-loss
protection, BMO's pro-rata realized losses on its exposure of $815 million in
Notes would be $451 million (based on BMO's exposure to $815 million of the
$2.2 billion of medium-term notes outstanding). As mentioned above, BMO has
recorded unrealized charges of $408 million against its Notes.

    Structured Investment Vehicles

    We provide senior-ranked funding support through BMO liquidity facilities
for two BMO-managed Structured Investment Vehicles (SIVs), Links Finance
Corporation (Links) and Parkland Finance Corporation (Parkland).
    At April 30, 2009, amounts drawn on the facilities totalled US$5.6
billion and (euro)458 million (US$4.9 billion and (euro)447 million at January
31, 2009; and US$3.7 billion and (euro)477 million at October 31, 2008). The
liquidity facilities totalled approximately US$7.0 billion for Links and
(euro)633 million for Parkland at April 30, 2009, down slightly from January
31, 2009 and down from US$7.7 billion and (euro)672 million at October 31,
2008. Advances under the liquidity facilities rank ahead of the SIVs'
subordinated capital notes. The total amount drawn under the liquidity
facilities is impacted by a number of factors including the pace and price of
asset sales, the maturity profile of the senior notes and asset maturities.
While the assets of the SIVs will mature over time, a significant portion is
expected to be repaid in the period between 2010 and 2012.
    Consistent with the strategy of selling assets in an orderly and
value-sensitive manner and as a result of weak market conditions, the pace of
asset sales remained slow during the quarter. We continue to anticipate that
the SIVs will continue the strategy of selling assets in an orderly manner
based upon market conditions and anticipate that there will be limited, if
any, asset sales in the current quarter. If there are no further asset sales
and assets are repaid as we anticipate given their terms, we expect that
outstanding amounts under the senior ranked funding facility will peak at
US$6.6 billion in August 2009 for Links and (euro)620 million in July 2009 for
Parkland.
    The SIVs' capital noteholders will continue to bear the economic risk
from actual losses up to the full amount of their investment. The book value
of the subordinated capital notes in Links and Parkland at April 30, 2009 was
US$1.05 billion and (euro)157 million, respectively. The book value of the
assets held by Links and Parkland totalled US$8.2 billion and (euro)794
million, respectively, reduced from US$8.4 billion and (euro)804 million at
January 31, 2009 and from US$9.0 billion and (euro)833 million at October 31,
2008. The market value of the assets held by Links and Parkland totalled
US$5.2 billion and (euro)551 million, respectively, reduced from US$5.6
billion and (euro)616 million at January 31, 2009 and from US$6.8 billion and
(euro)698 million at October 31, 2008. While the market value of the SIVs'
assets is currently lower than the US$6.9 billion of senior debt outstanding,
BMO believes that the first-loss protection provided by the subordinate
capital notes exceeds future expected losses.
    The asset quality of Links remains high. Based on market value,
approximately 58% of debt securities rated Aa3 or better by Moody's (69% at
January 31, 2009 and 84% at October 31, 2008) and 92% rated investment grade,
and with 54% rated AA- or better by S&P (62% at January 31, 2009 and 73% at
October 31, 2008) and 96% rated investment grade. Certain of the debt security
ratings are on credit watch, for downgrade. The senior notes of the SIVs have
ratings consistent with BMO's senior debt ratings of Aa1 (Moody's) and A+
(S&P). The SIVs hold no direct exposure to U.S. subprime mortgages. They hold
a diversified mix of debt securities and the mix of securities is largely
unchanged from October 31, 2008.

    Exposure to Major Financial Institutions

    Since October 31, 2008, governments in Europe and the United States have
continued to provide significant financial support to local financial
institutions. Trade flows between countries and regions were reduced, which
has put pressure on the economies and banking systems in many countries. In
view of the foregoing, BMO has continued to proactively manage its major
financial institution counterparty exposures.

    Caution

    Given the uncertainty in the capital markets environment, our capital
markets instruments could experience further valuation gains and losses due to
changes in market value.
    This Financial Instruments in the Difficult Credit Environment section
contains forward-looking statements. Please see the Caution Regarding
Forward-Looking Statements.

    The following table provides additional detail on select financial
instruments that are held in our investment and trading books. Most of our
CDOs and CLOs are fully hedged with other large financial institutions. Net
CDO exposure is minimal at $17 million, and net CLO exposure is also minimal,
at $100 million, consisting of the $84 million carrying value of unhedged and
wrapped instruments and a $16 million net loss on hedged instruments.
    BMO has invested only in senior and super-senior tranches of CDOs and
CLOs. Tranche ratings in the table use the lowest external rating available
provided by S&P, Moody's or Fitch. The difference between hedged investment
amounts and carrying value of hedged investments amounts reflect
mark-to-market adjustments, which are generally recoverable through total
return or credit default swaps. The underlying securities are a wide range of
corporate assets. Approximately 50% of hedged investment amounts have been
hedged through swaps with one financial institution counterparty rated A. The
value of BMO's interest in those hedges is supported by collateral held, with
the exception of relatively modest amounts as permitted under counterparty
agreements. The remainder is hedged through three monoline insurer
counterparties rated A to AAA.
    Amounts in the table below exclude credit default swap (CDS) protection
purchases from two credit derivative product company counterparties that have
a market value of US$293 million (before deduction of US$76 million of credit
valuation adjustments) and corresponding US$1.5 billion notional value of
CDOs' CDS protection provided to other financial institutions in our role as
intermediary.
    These exposures are discussed in more detail in the preceding Monoline
Insurers and Credit Derivative Product Companies section.

    
    Exposures to Other Select Financial Instruments ($ millions - Cdn)(1)

                    Carrying                   Cumul-
                       Value        Carrying   ative
                          of           Value Loss in         Net
                    Unhedged              of   Value  Cumul- Losses
    As at                  &  Hedged  Hedged      of  ative  on
    April            Wrapped  Invest- Invest- Hedged   Gain  Hedged
    30,      Tranche  Invest-   ment    ment  Invest-    on  Invest-
    2009      Rating   ments Amounts Amounts   ments Hedges  ments

    CDO's (2)  AAA       17                                       Sundry
                                                                   securities

               CCC              290       69    (221)   221    -  Hedged with
                                                                   FI rated A
              ----------------------------------------------------
                         17     290       69    (221)   221    -
              ----------------------------------------------------
              ----------------------------------------------------

    CLO's      AAA       84                                       Mostly U.K.
                                                                   and
                                                                   European
                                                                   mid-size
                                                                   corporate
                                                                   loans

               AAA              829      667    (162)   162    -  Hedged with
                                                                   FI rated A

               AAA            1,503    1,240    (263)   247  (16) Hedges with
                                                                   Monolines
                                                                   rated A or
                                                                   better
              ----------------------------------------------------
                         84   2,332    1,907    (425)   409  (16)
              ----------------------------------------------------
              ----------------------------------------------------

    Residential
    MBS (4)(5)

    No         AAA       37                                       Mostly U.K.
    subprime                                                       and
                                                                   Australian
                                                                   mortgages

    U.S.       A- to
    subprime    AA+       4                                       Wrapped
    - wrapped                                                      with
                                                                   monoline
                                                                   rated
                                                                   AAA(3)

               B- to     14                                       Wrapped
                BB+                                                with
                                                                   monoline
                                                                   rated
                                                                   A(3)

               CC         7                                       Wrapped
                                                                   with
                                                                   monoline
                                                                   that is no
                                                                   longer
                                                                   rated

    U.S.       A- to            108       82     (26)        (26) Hedges with
    subprime    AA+                                                FI's rated
                                                                   AA or
                                                                   better

               B- to             80       42     (38)    38     - Hedges with
                BB+                                                FI's rated
                                                                   AA or
                                                                   better
              ----------------------------------------------------
                         62     188      124     (64)    38  (26)
              ----------------------------------------------------
              ----------------------------------------------------

    Commercial AAA       38                                       European,
    MBS(5)                                                         U.K. and
                                                                   U.S.
                                                                   commercial
                                                                   real
                                                                   estate
                                                                   loans

               A- to     71                                       Mostly
                AA+                                                Canadian
                                                                   commercial
                                                                   and
                                                                   multi-use
                                                                   residen-
                                                                   tial loans
              ----------------------------------------------------
                        109
              ----------------------------------------------------
              ----------------------------------------------------

    Asset-     AAA      213                                       Mostly
    backed                                                         Canadian
    Secu-                                                          credit
    rities                                                         card re-
                                                                   ceivables
                                                                   and auto
                                                                   loans

               A- to    107                                       Mostly
                AA+                                                Canadian
                                                                   credit
                                                                   card re-
                                                                   ceivables
                                                                   and auto
                                                                   loans

               BBB- to   70                                       Collateral
                 BBB+                                              notes on
                                                                   Canadian
                                                                   credit
                                                                   card re-
                                                                   ceivables
              ----------------------------------------------------
                        390
              ----------------------------------------------------
              ----------------------------------------------------

                                                                 FI's
                                                                 =
                                                                 Financial
                                                                 Institutions

    (1) Most of the unhedged and wrapped investments were transferred to the
        available-for-sale portfolio effective August 1, 2008.
    (2) CDOs include indirect exposure to approximately $55.1 million of U.S.
        subprime residential mortgages. As noted above, this exposure is
        hedged via total return swaps with a large non-monoline financial
        institution.
    (3) Certain ratings are under review.
    (4) Wrapped MBS have an insurance guarantee attached and are rated
        inclusive of the wrap protection. RMBS included in the hedged
        investment amounts of $188 million have exposure to an estimated $92
        million of underlying U.S. subprime loans.
    (5) Amounts exclude BMO Life Assurance holdings of $34 million of
        residential MBS and $292 million of commercial MBS.


    Review of Operating Groups' Performance

    Operating Groups' Summary Income Statements and Statistics for Q2-2009

                                                   Q2-2009
                              -----------------------------------------------
    (Canadian $ in                                       Corporate
     millions, except                                    including     Total
     as noted)                   P&C       PCG    BMO CM       T&O       BMO
    -------------------------------------------------------------------------
    Net interest income
     (teb)(1)                  1,062       156       504      (385)    1,337
    Non-interest revenue         522       291       308       197     1,318
    -------------------------------------------------------------------------
    Total revenue
     (teb)(1)                  1,584       447       812      (188)    2,655
    Provision for (recovery
     of) credit losses           111         2        44       215       372
    Non-interest expense         936       353       451       148     1,888
    Income before income taxes
     and non-controlling
     interest in subsidiaries    537        92       317      (551)      395
    Income taxes (recovery)
     (teb)(1)                    162        30        68      (242)       18
    Non-controlling interest
     in subsidiaries               -         -         -        19        19
    -------------------------------------------------------------------------
    Net income Q2-2009           375        62       249      (328)      358
    -------------------------------------------------------------------------
    Net income Q1-2009           359        57       179      (370)      225
    -------------------------------------------------------------------------
    Net income Q2-2008           350       107       187        (2)      642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          206        37        65      (395)      (87)
    Return on equity           23.0%     25.9%     14.7%        nm      8.1%
    Cash return on equity      23.6%     26.3%     14.8%        nm      8.4%
    Operating leverage         (0.8%)   (13.1%)    14.8%        nm    (11.1%)
    Cash operating leverage    (0.6%)   (13.1%)    14.8%        nm    (11.0%)
    Productivity ratio (teb)   59.1%     79.1%     55.6%        nm     71.1%
    Cash productivity
     ratio (teb)               58.4%     78.9%     55.6%        nm     70.7%
    Net interest margin
     on earning assets(1)      2.93%     6.83%     1.09%        nm     1.55%
    Average common equity      6,473       964     6,555     2,786    16,778
    Average earning assets
     ($ billions)              148.5       9.4     190.0       5.0     352.9
    Full-time equivalent
     staff                    20,280     4,682     2,333     9,629    36,924
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                  YTD-2009
                              -----------------------------------------------
    (Canadian $ in                                       Corporate
     millions, except                                    including     Total
     as noted)                   P&C       PCG    BMO CM       T&O       BMO
    -------------------------------------------------------------------------
    Net interest income
     (teb)(1)                  2,127       334     1,020      (813)    2,668
    Non-interest revenue       1,030       571       519       309     2,429
    -------------------------------------------------------------------------
    Total revenue
     (teb)(1)                  3,157       905     1,539      (504)    5,097
    Provision for (recovery
     of) credit losses           224         3        86       487       800
    Non-interest expense       1,882       728       924       195     3,729
    Income before income taxes
     and non-controlling
     interest in subsidiaries  1,051       174       529    (1,186)      568
    Income taxes (recovery)
     (teb)(1)                    317        55       101      (526)      (53)
    Non-controlling interest
     in subsidiaries               -         -         -        38        38
    -------------------------------------------------------------------------
    Net income Q2-2009           734       119       428      (698)      583
    -------------------------------------------------------------------------
    Net income Q1-2009
    -------------------------------------------------------------------------
    Net income Q2-2008           667       203       158      (131)      897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          389        69        55      (819)     (306)
    Return on equity           22.1%     24.7%     12.3%        nm      6.5%
    Cash return on equity      22.6%     25.1%     12.3%        nm      6.8%
    Operating leverage          0.3%    (12.7%)    47.2%        nm     (3.5%)
    Cash operating leverage     0.4%    (12.8%)    47.2%        nm     (3.5%)
    Productivity ratio (teb)   59.6%     80.4%     60.0%        nm     73.2%
    Cash productivity
     ratio (teb)               59.0%     80.2%     60.0%        nm     72.7%
    Net interest margin
     on earning assets(1)      2.86%     7.62%     1.08%        nm     1.53%
    Average common equity      6,469       951     6,554     2,520    16,494
    Average earning assets
     ($ billions)              150.0       8.8     190.5       1.3     350.7
    Full-time equivalent
     staff
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    (1) Operating group revenues, income taxes and net interest margin are
        stated on a taxable equivalent basis (teb). The group teb adjustments
        are offset in Corporate, and Total BMO revenue, income taxes and net
        interest margin are stated on a GAAP basis. See the Non-GAAP Measures
        section.
    

    The following sections review the financial results of each of our
operating segments and operating groups for the second quarter of 2009.
    Periodically, certain business lines and units within the business lines
are transferred between client groups to more closely align BMO's
organizational structure and its strategic priorities. All comparative figures
are reclassified to reflect these transfers.

    Note 16 to the unaudited interim consolidated financial statements
outlines how income statement items requiring allocation are distributed among
the operating groups, including the allocation of the provision for credit
losses. Corporate Services is generally charged (or credited) with differences
between the periodic provisions for credit losses charged to the client groups
under our expected loss provisioning methodology and the periodic provisions
required under GAAP.

    
    Personal and Commercial Banking

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                        vs.                 vs.
     noted)                  Q2-2009             Q2-2008             Q1-2009
    -------------------------------------------------------------------------

    Net interest income (teb)  1,062       124       13%        (3)        -
    Non-interest revenue         522         5        1%        14        3%
    -------------------------------------------------------------------------

    Total revenue (teb)        1,584       129        9%        11        1%
    Provision for credit
     losses                      111        19       21%        (2)      (2%)
    Non-interest expense         936        82       10%       (10)      (1%)
    -------------------------------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries    537        28        5%        23        4%
    Income taxes (teb)           162         3        1%         7        4%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------

    Net income                   375        25        7%        16        5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          9         2       34%         2       21%
    -------------------------------------------------------------------------

    Cash net income              384        27        8%        18        5%
    -------------------------------------------------------------------------

    Return on equity           23.0%               (3.3%)               1.8%
    Cash return on equity      23.6%               (3.2%)               1.9%
    Operating leverage         (0.8%)                 nm                  nm
    Cash operating leverage    (0.6%)                 nm                  nm
    Productivity ratio (teb)   59.1%                0.4%               (1.0%)
    Cash productivity
     ratio (teb)               58.4%                0.3%               (1.2%)
    Net interest margin on
     earning assets (teb)      2.93%               0.28%               0.14%
    Average earning assets   148,541     4,634        3%    (2,943)      (2%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                        vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------

    Net interest income (teb)  2,127       249       13%
    Non-interest revenue       1,030        47        5%
    -----------------------------------------------------

    Total revenue (teb)        3,157       296       10%
    Provision for credit
     losses                      224        40       22%
    Non-interest expense       1,882       171       10%
    -----------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in subsidiaries  1,051        85        9%
    Income taxes (teb)           317        18        6%
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------

    Net income                   734        67       10%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                         16         2       19%
    -----------------------------------------------------

    Cash net income              750        69       10%
    -----------------------------------------------------

    Return on equity           22.1%               (3.9%)
    Cash return on equity      22.6%               (4.0%)
    Operating leverage          0.3%                  nm
    Cash operating leverage     0.4%                  nm
    Productivity ratio (teb)   59.6%               (0.2%)
    Cash productivity
     ratio (teb)               59.0%               (0.2%)
    Net interest margin on
     earning assets (teb)      2.86%               0.22%
    Average earning assets   150,037     7,256        5%
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Personal and Commercial Banking (P&C) represents the sum of our two
retail and business banking operating segments, Personal and Commercial
Banking Canada (P&C Canada) and Personal and Commercial Banking U.S. (P&C
U.S.). These operating segments are reviewed separately in the sections that
follow.

    
    Personal and Commercial Banking Canada (P&C Canada)


    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except                                           vs.                 vs.
     as noted)               Q2-2009             Q2-2008             Q1-2009
    -------------------------------------------------------------------------
    Net interest income (teb)    829        63        8%         4        1%
    Non-interest revenue         463        31        7%        14        3%
    -------------------------------------------------------------------------

    Total revenue (teb)        1,292        94        8%        18        1%
    Provision for credit
     losses                       93        11       13%        (2)      (2%)
    Non-interest expense         702        48        7%       (13)      (2%)
    -------------------------------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in
     subsidiaries                497        35        8%        33        7%
    Income taxes (teb)           147         5        4%         8        6%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------

    Net income                   350        30        9%        25        8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          1        (2)        -         -         -
    -------------------------------------------------------------------------

    Cash net income              351        28        9%        25        8%
    -------------------------------------------------------------------------

    Personal, Insurance &
     Other revenue               627         8        1%         1         -
    Commercial revenue           357        32       10%        11        3%
    Cards revenue                308        54       22%         6        2%
    Operating leverage          0.5%                  nm                  nm
    Cash operating leverage     0.6%                  nm                  nm
    Productivity ratio (teb)   54.3%               (0.3%)              (1.9%)
    Cash productivity ratio
     (teb)                     54.3%               (0.3%)              (1.8%)
    Net interest margin on
     earning assets (teb)      2.89%               0.30%               0.17%
    Average earning assets   117,587    (2,700)      (2%)   (2,630)      (2%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except                                           vs.
     as noted)              YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income (teb)  1,654       115        8%
    Non-interest revenue         912        62        7%
    -----------------------------------------------------

    Total revenue (teb)        2,566       177        7%
    Provision for credit
     losses                      188        23       14%
    Non-interest expense       1,417        71        5%
    -----------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in
     subsidiaries                961        83        9%
    Income taxes (teb)           286        19        7%
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------

    Net income                   675        64       10%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          2        (1)        -
    -----------------------------------------------------

    Cash net income              677        63       10%
    -----------------------------------------------------

    Personal, Insurance &
     Other revenue             1,253        29        2%
    Commercial revenue           702        36        5%
    Cards revenue                611       112       23%
    Operating leverage          2.1%                  nm
    Cash operating leverage     2.1%                  nm
    Productivity ratio (teb)   55.2%               (1.1%)
    Cash productivity ratio
     (teb)                     55.2%               (1.1%)
    Net interest margin on
     earning assets (teb)      2.80%               0.22%
    Average earning assets   118,924      (841)      (1%)
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q2 2009 vs Q2 2008

    Net income of $350 million increased $30 million or 9.1% from a year ago,
despite a slowing economy.
    Revenue rose $94 million or 7.8%, driven by volume growth across most
products and an improved net interest margin. Net interest margin increased by
30 basis points. Approximately one-half of the increase was attributable to
having securitized low-margin mortgages. The remaining increase was driven by
higher volumes in more profitable products including personal loans, personal
and commercial deposits and cards; favourable prime rates relative to Bankers'
Acceptances rates; and actions to mitigate the impact of rising long-term
funding costs, partially offset by lower mortgage refinancing fees.
    In the personal banking segment, revenue increased $8 million or 1.2%,
driven by volume growth in higher-spread loans and deposits, favourable prime
rates relative to BA rates and actions to mitigate the impact of rising
long-term funding costs. Homeowner Readiline growth drove personal loan growth
of 18% year over year. Market share increased 47 basis points from the prior
year but decreased 27 basis points from the first quarter to 11.80%.
    In the weaker housing market, our mortgage loan balances declined from a
year ago, due to securitization and the runoff of our broker-channel loans.
The rate of decline in mortgage market share is slowing as our mortgage broker
portfolio runs off. Mortgage market share decreased 89 basis points from a
year ago and 8 basis points from the first quarter.
    Personal deposits increased 6.2% year over year. The combination of
improved performance management, investment in our branch network, simplified
product offerings and customers' preferences for bank deposits in uncertain
market conditions contributed to this growth. Overall, we are encouraged to
see market share increase 23 basis points relative to the first quarter and 39
basis points year over year to 12.42% in a highly competitive environment.
    In the commercial banking segment, revenue increased $32 million or 9.7%
due to growth in higher-spread loans and deposits. The increase also reflected
actions to mitigate the impact of rising long-term funding costs and
favourable prime rates relative to BA rates. As expected, loan growth from a
year ago slowed to 3.2% amid economic weakness and continued intense
competition. BMO ranks second in Canadian business banking market share of
small and mid-sized businesses at 19.97%. Market share increased by 37 basis
points from the prior year and 4 basis points from the first quarter. On the
deposit side of the business, balances grew 9.2%, reflecting our customers'
attraction to the security of bank deposits in the current environment and
also our focus on meeting our customers banking needs.
    Cards and Payment Services revenue increased $54 million year over year
due to balance growth, spread improvement and higher Moneris revenue. Our
brand marketing and promotions together with better integration of card sales
across the branch system have resulted in continuing growth in the card
portfolio.
    Non-interest expense increased $48 million or 7.3%, primarily due to a
capital tax recovery in the prior year, employee benefits costs and higher
premises and maintenance costs due to the timing of expenditures. The group's
cash operating leverage was 0.6%. Adjusted for the impact of the capital tax
recovery a year ago, cash operating leverage for the quarter was more than
3.0%. Going forward, we plan to continue to invest strategically to improve
our competitive position and, mindful of the current economic environment,
continue to tightly manage our operating expenses.
    Average loans and acceptances, including securitized loans, increased
$5.9 billion or 4.5% from a year ago and personal and commercial deposits grew
$3.1 billion or 6.7%.

    Q2 2009 vs Q1 2009

    Net income increased $25 million or 7.6%.
    Revenue increased $18 million or 1.4% driven by improved net interest
margin and lower investment securities losses in the current quarter,
partially offset by the impact of three fewer calendar days in the second
quarter and lower volumes. Net interest margin improved by 17 basis points due
to actions to mitigate the impact of rising long-term funding costs and
favourable prime rates relative to BA rates, partially offset by lower
mortgage refinancing fees. The impact of having securitized low-margin
mortgages raised the overall net interest margin modestly.
    Non-interest expense decreased $13 million or 1.9% due to three fewer
days and annual stock-based compensation costs for employees eligible to
retire that were expensed in the prior quarter. We continue to manage expense
tightly.
    Average loans and acceptances including securitized loans decreased $0.6
billion or 0.4% from the first quarter, personal deposits increased $0.8
billion or 3.4% and commercial deposits decreased $0.5 billion or 2.0%.

    Q2 YTD 2009 vs Q2 YTD 2008

    Net income increased $64 million or 10%. Revenue increased $177 million
or 7.4% driven by volume growth across most products, an improved net interest
margin and higher cards and Moneris revenue, partially offset by net
investment securities losses due to softer equity markets. Margin increased 22
basis points. Slightly more than half of the increase was attributable to
having securitized mortgages. The remainder was due to higher volumes in more
profitable products, favourable prime rates relative to BA rates and actions
to mitigate the impact of rising long-term funding costs, partially offset by
lower mortgage refinancing fees. Non-interest expense increased $71 million or
5.3% primarily due to increases in employee benefit costs, capital taxes,
premises and maintenance, higher Moneris costs and initiatives spending. We
continue to manage expenses tightly.

    
    Personal and Commercial Banking U.S. (P&C U.S.)

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                        vs.                 vs.
     noted)                  Q2-2009             Q2-2008             Q1-2009
    -------------------------------------------------------------------------
    Net interest income (teb)    233        61       35%        (7)      (3%)
    Non-interest revenue          59       (26)     (30%)        -         -
    -------------------------------------------------------------------------

    Total revenue (teb)          292        35       14%        (7)      (3%)
    Provision for credit
     losses                       18         8       84%         -         -
    Non-interest expense         234        34       17%         3        2%
    -------------------------------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in
     subsidiaries                 40        (7)     (17%)      (10)     (23%)
    Income taxes (teb)            15        (2)     (20%)       (1)     (17%)
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------

    Net income                    25        (5)     (15%)       (9)     (26%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          8         4       27%         2       20%
    -------------------------------------------------------------------------

    Cash net income               33        (1)      (8%)       (7)     (18%)
    -------------------------------------------------------------------------

    Operating leverage         (3.7%)                 nm                  nm
    Cash operating leverage    (3.3%)                 nm                  nm
    Productivity ratio (teb)   80.3%                2.6%                3.3%
    Cash productivity ratio
     (teb)                     76.9%                2.2%                2.6%
    Net interest margin on
     earning assets (teb)      3.05%               0.12%                   -
    Average earning assets    30,954     7,334       31%      (313)      (1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)

    Net interest income (teb)    187        16       10%        (9)      (4%)
    Non-interest revenue          48       (36)     (43%)        -         -
    -------------------------------------------------------------------------

    Total revenue (teb)          235       (20)      (8%)       (9)      (4%)
    Non-interest expense         189        (9)      (5%)        1         -
    Net income                    21        (9)     (31%)       (6)     (26%)
    Average earning assets    24,924     1,458        6%      (557)      (2%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                        vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income (teb)    473       134       40%
    Non-interest revenue         118       (15)     (11%)
    -----------------------------------------------------

    Total revenue (teb)          591       119       25%
    Provision for credit
     losses                       36        17       92%
    Non-interest expense         465       100       27%
    -----------------------------------------------------

    Income before income
     taxes and
     non-controlling
     interest in
     subsidiaries                 90         2        3%
    Income taxes (teb)            31        (1)      (2%)
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------

    Net income                    59         3        5%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                         14         3       18%
    -----------------------------------------------------

    Cash net income               73         6        7%
    -----------------------------------------------------

    Operating leverage         (2.0%)                 nm
    Cash operating leverage    (2.4%)                 nm
    Productivity ratio (teb)   78.6%                1.2%
    Cash productivity ratio
     (teb)                     75.5%                1.4%
    Net interest margin on
     earning assets (teb)      3.05%               0.10%
    Average earning assets    31,113     8,097       35%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)

    Net interest income (teb)    383        45       13%
    Non-interest revenue          96       (36)     (27%)
    -----------------------------------------------------

    Total revenue (teb)          479         9        2%
    Non-interest expense         377        13        4%
    Net income                    48        (8)     (15%)
    Average earning assets    25,207     2,248       10%
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q2 2009 vs Q2 2008

    Net income decreased $5 million or 15% to $25 million. On a U.S. dollar
basis, net income decreased $9 million or 31% to $21 million.
    The weak credit environment reduced net income in the quarter by US$11
million as there are higher levels of non-performing loans and the costs of
managing this portfolio have increased.
    Revenue decreased US$20 million or 7.8%. Excluding the impact of a US$38
million gain on the Visa Inc. IPO a year ago, revenue increased US$18 million
or 8.3%. This increase was largely driven by our Wisconsin acquisitions and
deposit growth, partially offset by the increased impact of weaker credit
markets of US$7 million. Excluding acquisitions, loans grew US$388 million or
1.9% and deposits grew US$1.7 billion or 9.4%.
    Non-interest expense decreased US$9 million or 4.8%. Excluding the impact
of the US$17 million Visa Inc. litigation accrual recorded a year ago,
expenses increased US$8 million or 4.2%. This increase was largely due to our
Wisconsin acquisitions. Higher costs of managing our loan portfolio in the
weaker credit market environment of US$2 million were offset by the success of
focused expense management and higher seasonal expenses in the prior year.

    Q2 2009 vs Q1 2009

    Net income decreased by $9 million or 26%. On a U.S. dollar basis, net
income decreased $6 million or 26%.
    Revenue decreased US$9 million or 3.6% primarily due to a decline in
deposit revenues of US$5 million and the US$4 million impact of fewer days in
the current quarter.
    Non-interest expense increased US$1 million or 0.4%. Excluding the US$6
million reduction to the Visa litigation accrual in the first quarter,
expenses decreased US$5 million reflecting the timing of advertising, which is
expected to increase in the third quarter, and our continued focus on expense
management.

    Q2 YTD 2009 vs Q2 YTD 2008

    Net Income increased $3 million or 4.9%. On a U.S. dollar basis, net
income decreased $8 million or 15%. The weak credit environment reduced net
income by US$22 million.
    Revenue increased US$9 million or 1.9%. Excluding the US$38 million Visa
Inc. IPO gain of a year ago and the US$30 million impact of the Wisconsin
acquisitions, revenue improved US$17 million. The increase was largely due to
organic loan and deposit growth and deposit spread improvement, partially
offset by decreased loan spreads and the US$14 million increase in the impact
of weaker credit markets.
    Non-interest expense increased US$13 million or 3.5%. Excluding changes
in the Visa litigation accrual, expenses increased US$36 million primarily due
to the US$25 million impact of the Wisconsin acquisitions, a US$5 million
increase in costs of managing in the weaker credit market environment and
increased advertising of US$4 million.

    
    Private Client Group (PCG)

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                        vs.                 vs.
     noted)                  Q2-2009             Q2-2008             Q1-2009
    -------------------------------------------------------------------------
    Net interest income (teb)    156        (9)      (5%)      (22)     (12%)
    Non-interest revenue         291       (54)     (16%)       11        3%
    -------------------------------------------------------------------------

    Total revenue (teb)          447       (63)     (12%)      (11)      (3%)
    Provision for credit
     losses                        2         1       45%         1        4%
    Non-interest expense         353         3        1%       (22)      (6%)
    -------------------------------------------------------------------------

    Income before income
     taxes                        92       (67)     (42%)       10       11%
    Income taxes (teb)            30       (22)     (41%)        5       15%
    -------------------------------------------------------------------------
    Net income                    62       (45)     (42%)        5        9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          1         1         -         -         -
    -------------------------------------------------------------------------
    Cash net income               63       (44)     (42%)        5        9%
    -------------------------------------------------------------------------

    Return on equity           25.9%              (14.7%)                2.3%
    Cash return on equity      26.3%              (14.7%)                2.4%
    Operating leverage        (13.1%)                 nm                  nm
    Cash operating leverage   (13.1%)                 nm                  nm
    Productivity ratio (teb)   79.1%               10.3%               (2.6%)
    Cash productivity ratio
     (teb)                     78.9%               10.3%               (2.7%)
    Net interest margin on
     earning assets (teb)      6.83%              (2.37%)             (1.65%)
    Average earning assets     9,382     2,124       29%     1,064       13%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)           51        (8)     (13%)       11       27%
    Non-interest expense          51        (2)      (3%)       (2)      (4%)
    Net income                    (1)       (5)   (+100%)        7       96%
    Cash net income                -        (4)   (+100%)        8       99%
    Average earning assets     2,278       148        7%         8         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                  Increase
     in millions,                               (Decrease)
     except as                                         vs.
     noted)                  YTD-2009            YTD-2008
    ------------------------------------------------------
    Net interest income (teb)     334        14        5%
    Non-interest revenue          571      (138)     (20%)
    ------------------------------------------------------

    Total revenue (teb)           905      (124)     (12%)
    Provision for credit
     losses                         3         1       46%
    Non-interest expense          728         6        1%
    ------------------------------------------------------

    Income before income
     taxes                        174      (131)     (43%)
    Income taxes (teb)             55       (47)     (45%)
    ------------------------------------------------------
    Net income                    119       (84)     (41%)
    ------------------------------------------------------
    ------------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                           2         1         -
    ------------------------------------------------------
    Cash net income               121       (83)     (41%)
    ------------------------------------------------------

    Return on equity            24.7%              (13.8%)
    Cash return on equity       25.1%              (13.7%)
    Operating leverage         (12.7%)                 nm
    Cash operating leverage    (12.8%)                 nm
    Productivity ratio (teb)    80.4%               10.1%
    Cash productivity ratio
     (teb)                      80.2%               10.2%
    Net interest margin on
     earning assets (teb)       7.62%              (1.31%)
    Average earning assets      8,841     1,649       23%
    ------------------------------------------------------
    ------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)            91       (30)     (25%)
    Non-interest expense          104        (8)      (7%)
    Net income                     (9)      (15)   (+100%)
    Cash net income                (8)      (15)   (+100%)
    Average earning assets      2,274       162        8%
    ------------------------------------------------------
    ------------------------------------------------------
    nm - not meaningful
    

    Q2 2009 vs Q2 2008

    Net income of $62 million decreased $45 million or 42% from the same
quarter a year ago, reflective of challenging equity markets and low interest
rate environment. Results include one month of earnings from the acquisition
of BMO Life Assurance with minimal effect on net income in the quarter.
    Revenue declined $63 million or 12% and was negatively impacted by lower
revenue in full-service investing and lower fee-based revenue in our mutual
fund businesses, reflecting the negative impact of softer market conditions on
the group's assets under management and administration. Revenue in the
brokerage businesses was lowered by deposit spread compression. The stronger
U.S. dollar increased revenue growth by $13 million or 2.5 percentage points.
    Non-interest expense increased $3 million, including one month of BMO
Life Assurance expenses and higher costs associated with last year's expansion
of the sales forces. The stronger U.S. dollar increased expenses by $12
million or 3.3 percentage points. These were offset by lower revenue-based
costs and active expense management.
    Assets under management and administration have been affected by softer
market conditions and decreased $21 billion or 8.7%, despite a $13 billion
benefit related to the stronger U.S. dollar. There was strong volume growth in
term deposits, which increased $9 billion or 21% year over year.
    Effective April 1, 2009, BMO completed the acquisition of AIG Life
Insurance Company of Canada, which was then rebranded as BMO Life Assurance,
adopting the BMO Insurance brand for all of its marketing, broker and customer
communications. Effective in the third quarter, all of BMO's insurance
businesses will operate within Private Client Group given the alignment with
the wealth management strategy and the desire to bring insurance capabilities
and skill-sets together.

    Q2 2009 vs Q1 2009

    Net income increased $5 million or 8.7% from the prior quarter. Results
in the first quarter were lowered by the $17 million ($11 million after tax)
charge in respect of the valuation of auction-rate securities that we offered
to purchase from client accounts.
    Revenue of $447 million decreased by $11 million as the revenue benefits
from the inclusion of one month of revenues of BMO Life Assurance and the
prior quarter's charge for auction-rate securities were more than offset by
decreases in revenue in the full-service investing business and lower mutual
fund revenue. Net interest income was affected by lower spreads in term
investment products and spread compression on deposits in our brokerage
businesses.
    Non-interest expense decreased $22 million from the previous quarter due
to active expense management and lower revenue- based costs, partially offset
by the inclusion of one month of expenses from BMO Life Assurance in the
current quarter. The first quarter included a charge for the annual
stock-based compensation costs for employees eligible to retire.

    Q2 YTD 2009 vs Q2 YTD 2008

    Net income decreased $84 million or 41% from the same period a year ago,
reflective of challenging equity markets and a low interest rate environment.
Results in the current year were further lowered by the $11 million after-tax
charge in respect of the valuation of auction-rate securities.
    Revenue decreased by $124 million or 12%. The decline was primarily due
to lower revenue in full-service investing and lower fee-based revenue in our
mutual fund businesses, reflecting the negative impact of softer equity market
conditions on the group's assets under management and administration. Higher
net interest income was primarily due to volume growth in term investment
products and higher loans and deposits in private banking, partially offset by
lower revenue in the brokerage businesses due to spread compression on deposit
balances. The stronger U.S. dollar increased revenue by $23 million or 2.2
percentage points.
    Non-interest expense increased $6 million or 0.7%. Higher expenses were
primarily attributable to the inclusion of one month of results of BMO Life
Assurance and higher costs associated with last year's expansion of the sales
forces. The stronger U.S. dollar increased expenses by $23 million or 3.2
percentage points. These factors were partially offset by reductions in
incentive compensation and revenue-based costs, in line with lower revenue,
and the effects of active expense management.

    
    BMO Capital Markets (BMO CM)

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                        vs.                 vs.
     noted)                  Q2-2009             Q2-2008             Q1-2009
    -------------------------------------------------------------------------
    Net interest income (teb)    504       263      100%       (12)      (2%)
    Non-interest revenue         308      (143)     (32%)       97       46%
    -------------------------------------------------------------------------

    Total revenue (teb)          812       120       17%        85       12%
    Provision for credit
     losses                       44        15       51%         2        3%
    Non-interest expense         451        10        2%       (22)      (5%)
    -------------------------------------------------------------------------

    Income before income
     taxes                       317        95       42%       105       50%
    Income taxes (teb)            68        33       87%        35     +100%
    -------------------------------------------------------------------------

    Net income                   249        62       33%        70       40%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          -         -         -         -         -
    -------------------------------------------------------------------------

    Cash net income              249        62       33%        70       40%
    -------------------------------------------------------------------------

    Trading Products revenue     489        86       21%       167       52%
    Investment and Corporate
     Banking and Other
     revenue                     323        34       12%       (82)     (20%)
    Return on equity           14.7%                2.3%                4.8%
    Cash return on equity      14.8%                2.4%                4.9%
    Operating leverage         14.8%                  nm                  nm
    Cash operating leverage    14.8%                  nm                  nm
    Productivity ratio (teb)   55.6%               (8.0%)              (9.4%)
    Cash productivity ratio
     (teb)                     55.6%               (8.0%)              (9.4%)
    Net interest margin on
     earning assets (teb)      1.09%               0.53%               0.02%
    Average earning assets   190,022    15,279        9%    (1,013)      (1%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          344       100       40%      (141)     (29%)
    Non-interest expense         159         9        4%       (32)     (17%)
    Net income                   108        46       72%       (90)     (46%)
    Average earning assets    66,121    (5,123)      (7%)   (2,768)      (4%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                  Increase
     in millions,                               (Decrease)
     except as                                         vs.
     noted)                  YTD-2009            YTD-2008
    ------------------------------------------------------
    Net interest income (teb)  1,020       469       85%
    Non-interest revenue         519       105       25%
    -----------------------------------------------------

    Total revenue (teb)        1,539       574       59%
    Provision for credit
     losses                       86        28       49%
    Non-interest expense         924       101       12%
    -----------------------------------------------------

    Income before income
     taxes                       529       445     +100%
    Income taxes (teb)           101       175     +100%
    -----------------------------------------------------

    Net income                   428       270     +100%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of
     intangible assets (after
     tax)                          -         -         -
    -----------------------------------------------------

    Cash net income              428       270     +100%
    -----------------------------------------------------

    Trading Products revenue     811       421     +100%
    Investment and Corporate
     Banking and Other
     revenue                     728       153       27%
    Return on equity           12.3%                7.6%
    Cash return on equity      12.3%                7.6%
    Operating leverage         47.2%                  nm
    Cash operating leverage    47.2%                  nm
    Productivity ratio (teb)   60.0%              (25.3%)
    Cash productivity ratio
     (teb)                     60.0%              (25.2%)
    Net interest margin on
     earning assets (teb)      1.08%               0.47%
    Average earning assets   190,537     9,972        6%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          829       292       54%
    Non-interest expense         350        (9)      (3%)
    Net income                   306       189     +100%
    Average earning assets    67,528    (5,312)      (7%)
    -----------------------------------------------------
    -----------------------------------------------------
    nm - not meaningful
    

    Q2 2009 vs Q2 2008

    Net income was $249 million, up $62 million or 33% from a year ago.
Results for the quarter reflected charges of $117 million ($80 million after
tax) as described in the Effects of the Capital Markets Environment on Second
Quarter results section. Results a year ago included a net benefit of $42
million ($28 million after tax) as described in the Notable Items section.
    Revenue increased by $120 million to $812 million. The stronger U.S.
dollar increased revenues by $78 million relative to a year ago. There were
higher corporate banking revenues, continued strong performance in our
interest-rate-sensitive businesses and improvement in our equity underwriting
activity. These revenue increases were partially offset by lower trading
revenue, net securities losses and a decrease in commission fees.
    Trading Products revenue increased 21% from a year ago due to the
strength of certain core businesses. Our interest-rate-sensitive businesses
continue to outperform their prior year results. Trading revenues were up in
all areas with the exception of interest rate trading, due to this quarter's
charges in respect of the capital markets environment. The performance of our
commodities business continued to improve, with significant growth from the
low levels of the prior year. The increased trading revenues in our Trading
Products business were offset by trading losses on credit default swaps
recorded in our Investment and Corporate Banking and Other business noted
below.
    Investment and Corporate Banking and Other revenue increased by $34
million or 12% due to significantly higher corporate banking net interest
income, as a result of increased spread from recent business initiatives, and
also higher lending fees. Equity underwriting fees were up from a year ago,
although debt underwriting and merger and acquisition activity were softer.
Partially offsetting the revenue increases this quarter were trading losses of
$119 million arising from the mark-to-market of credit default swaps used to
hedge our loan portfolio. There were also net securities losses arising from
the fair value adjustments on certain merchant banking investments.
    Net interest income rose from a year ago due to higher corporate banking
net interest income as noted above, as well as higher revenues from our
interest-rate-sensitive businesses and a significant increase in trading net
interest income. Trading net interest income consists of interest earned on
trading assets less the costs of funding the assets. Net interest margin
improved 53 basis points from the prior year due to higher spreads in our
corporate lending business and in our interest-rate-sensitive businesses.
    Non-interest expense increased $10 million or 2.4%. The stronger U.S.
dollar increased expenses by $34 million. Adjusted for the impact of foreign
exchange, the group's expenses decreased, due in large part to lower employee
costs. The group's cash operating leverage was 14.8%.

    Q2 2009 vs Q1 2009

    Net income increased $70 million or 40%. Results in the first quarter
were affected by charges totalling $511 million ($348 million after tax) due
to the capital markets environment. Results in the current quarter reflected
$117 million ($80 million after tax) of charges, including mark-to-market
reversals of some of the first quarter charges.
    Revenue rose $85 million, in part due to large losses related to the
capital markets environment in the first quarter tempered by lower trading
revenues and more normalized performance from our interest-rate-sensitive
businesses in the current quarter. Corporate banking revenues were up
considerably with increased spreads and higher lending fees. Merger and
acquisition and debt underwriting revenue improved from the previous quarter,
while commission revenue and equity underwriting fees decreased.
    Non-interest expense was $22 million or 4.5% lower than in the first
quarter primarily due to $24 million of severance costs recorded that quarter.

    Q2 YTD 2009 vs Q2 YTD 2008

    Net income increased $270 million to $428 million. Results in 2009 were
affected by charges of $628 million ($428 million after tax) related to the
capital markets environment. Results in 2008 were affected by charges of $446
million ($296 million after tax).
    Revenue rose $574 million or 59% due to the strength of our underlying
core businesses. There were significantly improved trading revenues and
corporate banking revenues. Revenues from our interest-rate-sensitive
businesses also increased considerably and there has been a rebound in equity
underwriting activity. The stronger U.S. dollar has bolstered the revenue from
our U.S. businesses. In contrast, securities losses have increased and merger
and acquisition activity has remained soft over the first half of the year,
compared with a year ago. Commission revenue also decreased.
    Non-interest expense was $101 million higher than in the prior year in
part due to increased variable compensation consistent with improved revenue
performance, severance costs recorded in the current year and higher allocated
and computer costs.

    
    Corporate Services, Including Technology and Operations

    (Canadian $                                 Increase            Increase
     in millions,                              (Decrease)          (Decrease)
     except as                                        vs.                 vs.
     noted)                  Q2-2009             Q2-2008             Q1-2009
    -------------------------------------------------------------------------
    Net interest income (teb)   (385)     (215)   (+100%)       43       10%
    Non-interest revenue         197        64       49%        85       78%
    -------------------------------------------------------------------------

    Total revenue (teb)         (188)     (151)   (+100%)      128       41%
    Provision for credit
     losses                      215       186     +100%       (57)     (20%)
    Non-interest expense         148       113     +100%       101     +100%
    Loss before income taxes
     and non-controlling
     interest in
     subsidiaries                551       450     +100%       (84)     (13%)
    Income taxes (recovery)
     (teb)                      (242)      124     +100%       (42)     (15%)
    Non-controlling interest
     in subsidiaries              19         -         -         -         -
    -------------------------------------------------------------------------

    Net loss                     328       326     +100%       (42)     (11%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          (75)      (45)   (+100%)       48       39%
    Provision for credit
     losses                      162       119     +100%       (62)     (27%)
    Non-interest expense          19        24     +100%        33     +100%
    Income taxes (recovery)
     (teb)                       (90)       56     +100%       (40)     (29%)
    Net loss                     170       132     +100%       (38)     (19%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $                                 Increase
     in millions,                              (Decrease)
     except as                                        vs.
     noted)                 YTD-2009            YTD-2008
    -----------------------------------------------------
    Net interest income (teb)   (813)     (452)   (+100%)
    Non-interest revenue         309       157     +100%
    -----------------------------------------------------

    Total revenue (teb)         (504)     (295)   (+100%)
    Provision for credit
     losses                      487       350     +100%
    Non-interest expense         195       157     +100%
    Loss before income taxes
     and non-controlling
     interest in
     subsidiaries              1,186       802     +100%
    Income taxes (recovery)
     (teb)                      (526)      236       82%
    Non-controlling interest
     in subsidiaries              38         1        6%
    -----------------------------------------------------

    Net loss                     698       567     +100%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)         (198)     (102)   (+100%)
    Provision for credit
     losses                      386       224     +100%
    Non-interest expense           5        30     +100%
    Income taxes (recovery)
     (teb)                      (220)      116     +100%
    Net loss                     378       240     +100%
    -----------------------------------------------------
    ------------------------------------------------------
    

    Corporate Services

    Corporate Services includes the corporate units that provide expertise
and governance support to BMO Financial Group in areas such as strategic
planning, law, finance, internal audit, risk management, corporate
communications, corporate marketing, human resources and learning. Operating
results include revenues and expenses associated with certain securitization
activities, the hedging of foreign-source earnings and activities related to
BMO's overall asset-liability management.
    Corporate Services is generally charged (or credited) with differences
between the periodic provisions for credit losses charged to the client groups
under our expected loss provisioning methodology and the required periodic
provisions charged by the consolidated organization under GAAP.

    Technology and Operations

    Technology and Operations (T&O) manages, maintains and provides
governance over information technology, operations services, real estate and
sourcing for BMO Financial Group. T&O focuses on enterprise-wide priorities
that improve service quality and efficiency to deliver an excellent customer
experience.

    Financial Performance Review

    Technology and Operations operating results are included with Corporate
Services for reporting purposes. Costs of T&O's services are transferred to
the client groups (P&C, PCG and BMO Capital Markets) and only relatively minor
amounts are retained within T&O. As such, results in this section largely
reflect the other corporate units outlined above.
    There was a net loss of $328 million in the quarter compared with a net
loss of $2 million in the prior year due to higher provisions for credit
losses related to BMO's application of the expected-loss-provisioning
methodology, lower revenues and the $118 million of severance costs recorded
in the quarter. Revenues were worse primarily due to the negative carry on
certain asset-liability interest rate positions as a result of market interest
rate changes, the continued impact of funding activities that have enhanced
our strong liquidity position and the effect of credit card securitizations
completed in 2008.
    Net loss decreased $42 million from the first quarter but results
improved $122 million excluding the $80 million of after-tax severance costs.
There were improved revenues, which reflect actions to lower the negative
carry on certain asset-liability interest rate and liquidity management
positions and mark-to-market gains on hedging activities this quarter versus
mark-to-market losses in the prior quarter, as well as lower provisions for
credit losses.
    Net loss for the year to date rose $567 million from a year ago, driven
in large part by higher provisions for credit losses, due to our expected loss
provisioning methodology, lower revenues and the severance costs discussed
above.

    
    Notable items

    (Canadian $ in millions,
     except as noted)          Q2-2009  Q1-2009  Q2-2008  YTD-2009  YTD-2008
    -------------------------------------------------------------------------

    Charges related to
     deterioration in
     capital markets
     environment                   117      528      (42)      645       446
    Related income taxes            37      169      (14)      206       150
    -------------------------------------------------------------------------
    Net impact of charges
     related to
     deterioration in
     capital markets
     environment(a)                 80      359      (28)      439       296
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Severance costs                118        -        -       118         -
    Related income taxes            38        -        -        38         -
    -------------------------------------------------------------------------
    Net impact of severance(b)      80        -        -        80         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Increase in general
     allowance                       -        -        -         -        60
    Related income taxes             -        -        -         -        22
    -------------------------------------------------------------------------
    Net impact of increase
     in general allowance(c)         -        -        -         -        38
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net impact of
     notable items(a+b+c)          160      359      (28)      519       334
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Notable Items

    Q2 2009

    Net income for the second quarter of 2009 was affected by $235 million
($160 million after tax and $0.30 per share) of capital markets environment
charges and severance costs.
    Results included capital markets environment charges of $117 million ($80
million after tax and $0.15 per share) recorded in BMO Capital Markets in
respect of:

    -   charges of $215 million ($147 million after tax) on exposures to a
        Canadian credit protection vehicle (Apex); and

    -   benefit for credit valuation adjustments (CVA) of $98 million pre-tax
        ($67 million after tax).
    

    The above charges reduced trading non-interest revenue by $117 million.
Further detail on the charges is provided in the Effects of the Capital
Markets Environment on Second Quarter Results section.
    Results also included severance costs of $118 million ($80 million after
tax and $0.15 per share) recorded in Corporate Services.

    Q2 2008

    BMO's results in the second quarter of 2008 included a net benefit of $42
million ($28 million after tax and $0.06 per share) related to the capital
markets environment.
    The net benefit of $42 million above was reflected in trading non-
interest revenue ($71 million), other revenue ($6 million) and investment
securities gains (-$35 million).

    Q1 2009

    Results in the first quarter of 2009 were affected by capital markets
environment charges of $528 million ($359 million after tax and $0.69 per
share). BMO Capital Markets recorded unrealized capital markets environment
charges of $511 million ($348 million after tax), and PCG also recorded
charges of $17 million ($11 million after tax) related to auction-rate
securities.
    The $528 million of charges outlined above reduced trading non-interest
revenue ($285 million), investment securities gains ($226 million) and other
revenue ($17 million).

    YTD 2009

    Net income for the year-to-date 2009 was affected by $763 million ($519
million after tax and $0.99 per share) of capital markets environment charges
and severance costs. BMO Capital Markets recorded capital markets environment
charges of $628 million ($428 million after tax) and PCG recorded charges of
$17 million ($11 million after tax) related to auction-rate securities. There
were also severance costs in Corporate Services of $118 million ($80 million
after tax).
    Non-interest revenue for year-to-date 2009 was affected by the $645
million of charges outlined above. There were reductions in trading non-
interest revenue ($402 million), investment securities gains ($226 million)
and other revenue ($17 million).

    YTD 2008

    Net income for the year-to-date 2008 was reduced by $506 million ($334
million after tax and $0.66 per share) of charges for certain trading
activities and valuation adjustments and an increase in the general allowance
for credit losses. They included $446 million ($296 million after tax) of
charges in respect of the capital markets environment in BMO Capital Markets
and a $60 million ($38 million after tax) increase in the general allowance
for credit losses recorded in Corporate Services to reflect portfolio growth
and risk migration.
    Non-interest revenue for year-to-date 2008 was affected by the $446
million of charges outlined above. There were reductions in trading non-
interest revenue ($349 million), investment securities gains ($58 million) and
other revenue ($39 million).

    
    GAAP and Related Non-GAAP Measures used in the MD&A

    (Canadian $ in millions,
     except as noted)          Q2-2009  Q1-2009  Q2-2008  YTD-2009  YTD-2008
    -------------------------------------------------------------------------

    Non-interest expense(a)      1,888    1,841    1,680     3,729     3,294
    Amortization of
     acquisition-related
     intangible assets
     (note 1)                      (12)     (10)     (10)      (22)      (20)
    -------------------------------------------------------------------------
    Cash-based non-interest
     expense(b) (note 2)         1,876    1,831    1,670     3,707     3,274
    -------------------------------------------------------------------------

    Net income                     358      225      642       583       897
    Amortization of
     acquisition-related
     intangible assets,
     net of income taxes            10        8        8        18        16
    -------------------------------------------------------------------------
    Cash net income (note 2)       368      233      650       601       913
    Preferred share dividends      (26)     (23)     (14)      (49)      (29)
    Charge for capital (note 2)   (429)    (429)    (370)     (858)     (745)
    -------------------------------------------------------------------------
    Net economic profit (note 2)   (87)    (219)     266      (306)      139
    -------------------------------------------------------------------------

    Revenue(c)                   2,655    2,442    2,620     5,097     4,646
    Revenue growth (%)(d)          1.3     20.5      3.6       9.7       1.1
    Productivity ratio (%)
     ((a/c) x 100)                71.1     75.4     64.1      73.2      70.9
    Cash productivity ratio
     (%) ((b/c) x 100) (note 2)   70.7     75.0     63.8      72.7      70.5
    Non-interest expense
     growth (%)(e)                12.4     14.1      4.1      13.2       0.2
    Cash-based non-interest
     expense growth (%)
     (f) (note 2)                 12.3     14.1      4.3      13.2       0.3
    Operating leverage
     (%)(d-e)                    (11.1)     6.4     (0.5)     (3.5)      0.9
    Cash operating leverage
     (%)(d-f) (note 2)           (11.0)     6.4     (0.7)     (3.5)      0.8
    EPS (uses net income) ($)     0.61     0.39     1.25      1.00      1.72
    Cash EPS (uses cash
     net income) ($)              0.63     0.40     1.26      1.03      1.75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Note 1: The amortization of non-acquisition-related intangible assets is
            not added back in the determination of cash net income.
    Note 2: These are non-GAAP amounts or non-GAAP measures.
    

    Non-GAAP Measures

    BMO uses both GAAP and certain non-GAAP measures to assess performance.
Securities regulators require that companies caution readers that earnings and
other measures adjusted to a basis other than GAAP do not have standardized
meanings under GAAP and are unlikely to be comparable to similar measures used
by other companies. The above table reconciles the non-GAAP measures, which
management regularly monitors, to their GAAP counterparts.
    At times, we indicate certain measures excluding the effects of items but
generally do so in conjunction with disclosure of the nearest GAAP measure and
provide detail of the reconciling item. Amounts and measures stated on such a
basis are considered useful as they could be expected to be reflective of
ongoing operating results or assist readers' understanding of performance. To
assist readers, we have also provided a schedule that summarizes notable items
that have affected results in the reporting periods.
    Cash earnings, cash productivity and cash operating leverage measures may
enhance comparisons between periods when there has been an acquisition,
particularly because the purchase decision may not consider the amortization
of acquisition-related intangible assets to be a relevant expense. Cash EPS
measures are also disclosed because analysts often focus on this measure, and
cash EPS is used by Thomson First Call to track third-party earnings estimates
that are frequently reported in the media. Cash measures add the after-tax
amortization of acquisition-related intangible assets to GAAP earnings to
derive cash net income (and associated cash EPS) and deduct the amortization
of acquisition-related intangible assets from non-interest expense to derive
cash productivity and cash operating leverage measures.
    Net economic profit represents cash net income available to common
shareholders, less a charge for capital, and is considered an effective
measure of economic value added.

    
    INVESTOR AND MEDIA PRESENTATION

    Investor Presentation Materials
    

    Interested parties are invited to visit our website at
www.bmo.com/investorrelations to review this quarterly news release,
presentation materials and a supplementary financial information package
online.

    Quarterly Conference Call and Webcast Presentations

    Interested parties are also invited to listen to our quarterly conference
call on Tuesday, May 26, 2009 at 2:00 p.m. (EDT). At that time, senior BMO
executives will comment on results for the quarter and respond to questions
from the investor community. The call may be accessed by telephone at 416-695-
9753 (from within Toronto) or 1-888-789-0089 (toll-free outside Toronto). A
replay of the conference call can be accessed until Monday, August 24, 2009 by
calling 416-695-5800 (from within Toronto) or 1-800-408-3053 (toll-free
outside Toronto) and entering passcode 3278111.
    A live webcast of the call can be accessed on our website at
www.bmo.com/investorrelations. A replay can be accessed on the site until
Monday, August 24, 2009.

    
    Media Relations Contacts

    Ralph Marranca, Toronto, ralph.marranca@bmo.com, 416-867-3996
    Ronald Monet, Montreal, ronald.monet@bmo.com, 514-877-1873

    Investor Relations Contacts

    Viki Lazaris, Senior Vice-President, viki.lazaris@bmo.com,
    416-867-6656
    Steven Bonin, Director, steven.bonin@bmo.com, 416-867-5452
    Andrew Chin, Senior Manager, andrew.chin@bmo.com, 416-867-7019

    Chief Financial Officer

    Russel Robertson, Interim Chief Financial Officer
    russ.robertson@bmo.com, 416-867-7360

    Corporate Secretary

    Blair Morrison, Vice-President & Corporate Secretary
    corp.secretary@bmo.com, 416-867-6785

    -------------------------------------------------------------------------

    Shareholder Dividend Reinvestment    For other shareholder information,
    and Share Purchase Plan              please contact

    Average market price                 Bank of Montreal
    February 2009 $ 25.96 ($25.44(*))    Shareholder Services
    March 2009    $ 33.22                Corporate Secretary's Department
    April 2009    $ 39.83                One First Canadian Place, 19th Floor
    (*) reflects 2% discount for         Toronto, Ontario M5X 1A1
        dividend reinvestment            Telephone: (416) 867-6785
                                         Fax: (416) 867-6793
    For dividend information, change     E-mail: corp.secretary@bmo.com
    in shareholder address or to
    advise of duplicate mailings,        For further information on
    please contact                       this report, please contact

    Computershare Trust Company          Bank of Montreal
    of Canada                            Investor Relations Department
    100 University Avenue, 9th Floor     P.O. Box 1, One First Canadian
    Toronto, Ontario M5J 2Y1             Place, 18th Floor
    Telephone: 1-800-340-5021            Toronto, Ontario M5X 1A1
    (Canada and the United States)
    Telephone: (514) 982-7800            To review financial results online,
    (international)                      please visit our website at
    Fax: 1-888-453-0330                  www.bmo.com
    (Canada and the United States)
    Fax: (416) 263-9394
    (international)
    E-mail: service@computershare.com

    -------------------------------------------------------------------------

    (R) Registered trade-mark of Bank of Montreal



    Financial Highlights

    (Unaudited)
     (Canadian $
     in millions,
     except as
     noted)                      For the three months ended
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                     April   January   October      July     April     April
                  30, 2009  31, 2009  31, 2008  31, 2008  30, 2008  30, 2008
    -------------------------------------------------------------------------
    Income
     Statement
     Highlights
    Total
     revenue     $   2,655 $   2,442 $   2,813 $   2,746 $   2,620       1.3%
    Provision for
     credit
     losses            372       428       465       484       151      +100
    Non-interest
     expense         1,888     1,841     1,818     1,782     1,680      12.4
    Net income         358       225       560       521       642     (44.3)
    -------------------------------------------------------------------------
    Net Income by
     Operating
     Segment
    P&C Canada   $     350 $     325 $     333 $     331 $     320       9.4%
    P&C U.S.            25        34        12        28        30     (16.7)
    PCG                 62        57        75       108       107     (42.1)
    BMO CM             249       179       290       263       187      33.2
    Corporate
     Services(a)      (328)     (370)     (150)     (209)       (2)    (-100)
    -------------------------------------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share   $    0.61 $    0.39 $    1.06 $    0.98 $    1.25 $   (0.64)
    Diluted cash
     earnings per
     share(b)         0.63      0.40      1.08      1.00      1.26     (0.63)
    Dividends
     declared per
     share            0.70      0.70      0.70      0.70      0.70      0.00
    Book value per
     share           32.22     32.18     32.02     30.15     29.71      2.51
    Closing share
     price           39.50     33.25     43.02     47.94     50.10    (10.60)
    Total market
     value of
     common shares
     ($ billions)     21.5      17.9      21.7      24.2      25.2      (3.7)
    -------------------------------------------------------------------------
                                             As at
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                     April   January   October      July     April     April
                  30, 2009  31, 2009  31, 2008  31, 2008  30, 2008  30, 2008
    -------------------------------------------------------------------------
    Balance Sheet
     Highlights
    Assets       $ 432,245 $ 443,174 $ 416,050 $ 375,047 $ 375,158      15.2%
    Net loans and
     acceptan-
     ces(d)        179,698   190,099   186,962   175,882   171,826       4.6
    Deposits       247,169   264,580   257,670   248,657   238,580       3.6
    Common
     shareholders'
     equity         17,561    17,371    16,158    15,207    14,954      17.4
    -------------------------------------------------------------------------
                             For the three months ended
    -------------------------------------------------------------------------
                     April   January   October      July     April
                  30, 2009  31, 2009  31, 2008  31, 2008  30, 2008
    -------------------------------------------------------------------------
    Financial
     Measures
     (%)(c)
    Average
     annual five
     year total
     shareholder
     return           (1.2)     (6.9)      0.9       5.1       8.2
    Diluted earnings
     per share
     growth          (51.2)    (17.0)     21.8     (23.4)     (3.1)
    Diluted cash
     earnings per
     share growth(b) (50.0)    (18.4)     21.3     (23.1)     (3.8)
    Return on equity   8.1       4.9      14.0      13.5      17.9
    Cash return on
     equity(b)         8.4       5.2      14.3      13.7      18.1
    Net economic
     profit (NEP)
     growth(b)       (+100)    (71.8)     +100     (56.5)     (7.9)
    Operating
     leverage        (11.1)      6.4      18.0       0.1      (0.5)
    Cash operating
     leverage(b)     (11.0)      6.4      18.0       0.0      (0.7)
    Revenue growth     1.3      20.5      27.9       7.5       3.6
    Non-interest
     expense-to-
     revenue ratio    71.1      75.4      64.6      64.9      64.1
    Cash non-interest
     expense-to-
     revenue ratio(b) 70.7      75.0      64.2      64.5      63.8
    Provision for
     credit losses-
     to-average
     loans and
     acceptances
     (annualized)(d)  0.79      0.90      1.01      1.10      0.35
    Gross impaired
     loans and
     acceptances-to-
     equity and
     allowance for
     credit losses   12.95     11.91     11.34      9.09      9.54
    Cash and
     securities-to-
     total assets
     ratio            28.2      28.2      29.1      29.6      29.6
    Tier 1 capital
     ratio -
     Basel II        10.70     10.21      9.77      9.90      9.42
    Credit rating
      DBRS              AA        AA        AA        AA        AA
      Fitch            AA-       AA-       AA-       AA-       AA-
      Moody's          Aa1       Aa1       Aa1       Aa1       Aa1
      Standard &
       Poor's           A+        A+        A+        A+        A+
    -------------------------------------------------------------------------
    Financial Ratios
     (% except as
     noted)(c)
    Twelve month
     total
     shareholder
     return          (15.2)    (37.7)    (27.9)    (24.4)    (24.6)
    Dividend yield    7.09      8.42      6.51      5.84      5.59
    Price-to-earnings
     ratio (times)    13.0       9.0      11.4      13.4      12.9
    Market-to-book
     value (times)    1.23      1.03      1.34      1.59      1.69
    Net economic
     profit
     ($ millions)(b)   (87)     (219)      145       122       266
    Return on
     average assets   0.32      0.19      0.54      0.52      0.66
    Net interest
     margin on
     average earning
     assets           1.55      1.51      1.71      1.59      1.48
    Non-interest
     revenue-to-
     total revenue    49.6      45.5      49.8      53.2      55.2
    Non-interest
     expense growth   12.4      14.1       9.9       7.4       4.1
    Cash non-interest
     expense
     growth(b)        12.3      14.1       9.9       7.5       4.3
    Total capital
     ratio -
     Basel II        13.20     12.87     12.17     12.29     11.64
    Equity-to-assets
     ratio             4.6       4.3       4.3       4.5       4.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                    For the six months ended
    -------------------------------------------
                                        Change
                                          from
                     April     April     April
                  30, 2009  30, 2008  30, 2008
    -------------------------------------------
    Income
     Statement
     Highlights
    Total
     revenue     $   5,097 $   4,646       9.7%
    Provision for
     credit
     losses            800       381      +100
    Non-interest
     expense         3,729     3,294      13.2
    Net income         583       897     (35.0)
    -------------------------------------------
    Net Income by
     Operating
     Segment
    P&C Canada   $     675 $     611      10.5%
    P&C U.S.            59        56       5.4
    PCG                119       203     (41.4)
    BMO CM             428       158      +100
    Corporate
     Services(a)      (698)     (131)    (-100)
    -------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share   $    1.00 $    1.72 $   (0.72)
    Diluted cash
     earnings per
     share(b)         1.03      1.75     (0.72)
    Dividends
     declared per
     share            1.40      1.40      0.00
    Book value per
     share           32.22     29.71      2.51
    Closing share
     price           39.50     50.10    (10.60)
    Total market
     value of
     common shares
     ($ billions)     21.5      25.2      (3.7)
    -------------------------------------------
                      For the six
                      months ended
    -------------------------------------------
                     April     April
                  30, 2009  30, 2008
    -------------------------------------------
    Financial
     Measures
    (%)(c)
    Average
     annual five
     year total
     shareholder
     return           (1.2)      8.2
    Diluted earnings
     per share
     growth          (41.9)    (12.2)
    Diluted cash
     earnings per
     share growth(b) (41.1)    (12.1)
    Return on equity   6.5      12.2
    Cash return on
     equity(b)         6.8      12.5
    Net economic
     profit (NEP)
     growth(b)       (+100)    (44.8)
    Operating
     leverage         (3.5)      0.9
    Cash operating
     leverage(b)      (3.5)      0.8
    Revenue growth     9.7       1.1
    Non-interest
     expense-to-
     revenue ratio    73.2      70.9
    Cash non-interest
     expense-to-
     revenue ratio(b) 72.7      70.5
    Provision for
     credit losses-
     to-average
     loans and
     acceptances
     (annualized)(d)  0.85      0.45
    Gross impaired
     loans and
     acceptances-to-
     equity and
     allowance for
     credit losses   12.95      9.54
    Cash and
     securities-to-
     total assets
     ratio            28.2      29.6
    Tier 1 capital
     ratio -
     Basel II        10.70      9.42
    Credit rating
      DBRS              AA        AA
      Fitch            AA-       AA-
      Moody's          Aa1       Aa1
      Standard &
       Poor's           A+        A+
    -------------------------------------------
    Financial Ratios
     (% except as
     noted)(c)
    Twelve month
     total
     shareholder
     return          (15.2)    (24.6)
    Dividend yield    7.09      5.59
    Price-to-earnings
     ratio (times)    13.0      12.9
    Market-to-book
     value (times)    1.23      1.69
    Net economic
     profit
     ($ millions)(b)  (306)      139
    Return on
     average assets   0.25      0.46
    Net interest
     margin on
     average earning
     assets           1.53      1.46
    Non-interest
     revenue-to-
     total revenue    47.6      48.6
    Non-interest
     expense growth   13.2       0.2
    Cash non-interest
     expense
     growth(b)        13.2       0.3
    Total capital
     ratio -
     Basel II        13.20     11.64
    Equity-to-assets
     ratio             4.6       4.4
    -------------------------------------------
    -------------------------------------------
    All ratios in this report are based on unrounded numbers.
    (a) Corporate Services includes Technology and Operations.
    (b) Refer to the "Non-GAAP Measures" section of Management's Discussion
        and Analysis for an explanation of cash results and net economic
        profit. Securities regulators require that companies caution readers
        that earnings and other measures adjusted to a basis other than
        generally accepted accounting principles (GAAP) do not have
        standardized meanings under GAAP and are unlikely to be comparable to
        similar measures used by other companies.
    (c) For the period ended, or as at, as appropriate.
    (d) Effective in the first quarter of 2009, securities borrowed or
        purchased under resale agreements are excluded from net loans and
        acceptances and credit statistics. All comparative figures have been
        restated.



    Interim Consolidated Financial Statements

    Consolidated Statement of Income


    (Unaudited)
     (Canadian $ in millions,
     except as noted)                   For the three months ended
    -------------------------------------------------------------------------
                               April   January   October      July     April
                            30, 2009  31, 2009  31, 2008  31, 2008  30, 2008
    -------------------------------------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans                  $   1,825 $   2,213 $   2,554 $   2,467 $   2,609
    Securities                   685       828       748       705       805
    Deposits with banks           48        96       182       203       230
    -------------------------------------------------------------------------
                               2,558     3,137     3,484     3,375     3,644
    -------------------------------------------------------------------------
    Interest Expense
    Deposits                     967     1,446     1,590     1,612     1,842
    Subordinated debt             56        60        61        61        51
    Capital trust securities
     and preferred shares         19        21        23        22        23
    Other liabilities            179       279       397       394       554
    -------------------------------------------------------------------------
                               1,221     1,806     2,071     2,089     2,470
    -------------------------------------------------------------------------
    Net Interest Income        1,337     1,331     1,413     1,286     1,174
    Provision for credit
     losses (Note 3)             372       428       465       484       151
    -------------------------------------------------------------------------
    Net Interest Income
     After Provision for
     Credit Losses               965       903       948       802     1,023
    -------------------------------------------------------------------------
    Non-Interest Revenue
    Securities commissions
     and fees                    235       248       270       294       270
    Deposit and payment
     service charges             204       205       203       190       181
    Trading revenues (losses)     63       224       435       220       192
    Lending fees                 148       119       120       116       101
    Card fees                     33        24        58        88        78
    Investment management
     and custodial fees           84        88        87        86        85
    Mutual fund revenues         106       114       140       151       144
    Securitization revenues      262       264       167       133       133
    Underwriting and
     advisory fees               103        77        66        97        98
    Securities gains (losses),
     other than trading          (42)     (314)     (252)      (75)       14
    Foreign exchange, other
     than trading                 25        13        (4)       25        30
    Insurance income              62        56        52        56        52
    Other                         35        (7)       58        79        68
    -------------------------------------------------------------------------
                               1,318     1,111     1,400     1,460     1,446
    -------------------------------------------------------------------------
    Net Interest Income and
     Non-Interest Revenue      2,283     2,014     2,348     2,262     2,469
    -------------------------------------------------------------------------
    Non-Interest Expense
    Employee compensation
     (Note 9)                  1,129     1,087     1,007     1,044       980
    Premises and equipment
     (Note 2)                    339       327       338       312       300
    Amortization of intangible
     assets (Note 2)              54        51        48        45        45
    Travel and business
     development                  73        82        95        87        74
    Communications                57        51        57        50        53
    Business and capital taxes    13        15        11        20        (1)
    Professional fees             82        92       113       102        90
    Other                        141       136       157       122       139
    -------------------------------------------------------------------------
                               1,888     1,841     1,826     1,782     1,680
    -------------------------------------------------------------------------
    Restructuring Charge
     (Reversal) (Note 10)          -         -        (8)        -         -
    -------------------------------------------------------------------------
    Income Before Provision
     for (Recovery of) Income
     Taxes and Non-Controlling
     Interest in Subsidiaries    395       173       530       480       789
    Income taxes                  18       (71)      (49)      (59)      128
    -------------------------------------------------------------------------
                                 377       244       579       539       661
    Non-controlling interest
     in subsidiaries              19        19        19        18        19
    -------------------------------------------------------------------------
    Net Income             $     358 $     225 $     560 $     521 $     642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Preferred share
     dividends             $      26 $      23 $      25 $      19 $      14
    Net income available
     to common
     shareholders          $     332 $     202 $     535 $     502 $     628
    Average common shares
     (in thousands)          543,634   520,020   503,004   504,124   502,054
    Average diluted common
     shares (in thousands)   544,327   523,808   506,591   508,032   506,638
    -------------------------------------------------------------------------
    Earnings Per Share
     (Canadian $)
    Basic                  $    0.61 $    0.39 $    1.06 $    1.00 $    1.25
    Diluted                     0.61      0.39      1.06      0.98      1.25
    Dividends Declared
     Per Common Share           0.70      0.70      0.70      0.70      0.70
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                For the six
                                months ended
    -------------------------------------------
                               April     April
                            30, 2009  30, 2008
    -------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans                  $   4,038 $   5,593
    Securities                 1,513     1,753
    Deposits with banks          144       545
    -------------------------------------------
                               5,695     7,891
    -------------------------------------------
    Interest Expense
    Deposits                   2,413     4,139
    Subordinated debt            116       100
    Capital trust securities
     and preferred shares         40        46
    Other liabilities            458     1,218
    -------------------------------------------
                               3,027     5,503
    -------------------------------------------
    Net Interest Income        2,668     2,388
    Provision for credit
     losses (Note 3)             800       381
    -------------------------------------------
    Net Interest Income
     After Provision for
     Credit Losses             1,868     2,007
    -------------------------------------------
    Non-Interest Revenue
    Securities commissions
     and fees                    483       541
    Deposit and payment
     service charges             409       363
    Trading revenues (losses)    287      (109)
    Lending fees                 267       193
    Card fees                     57       145
    Investment management
     and custodial fees          172       166
    Mutual fund revenues         220       298
    Securitization revenues      526       213
    Underwriting and
     advisory fees               180       190
    Securities gains (losses),
     other than trading         (356)       12
    Foreign exchange, other
     than trading                 38        59
    Insurance income             118       114
    Other                         28        73
    -------------------------------------------
                               2,429     2,258
    -------------------------------------------
    Net Interest Income and
     Non-Interest Revenue      4,297     4,265
    -------------------------------------------
    Non-Interest Expense
    Employee compensation
     (Note 9)                  2,216     1,925
    Premises and equipment
     (Note 2)                    666       591
    Amortization of intangible
     assets (Note 2)             105        90
    Travel and business
     development                 155       146
    Communications               108        95
    Business and capital taxes    28        11
    Professional fees            174       169
    Other                        277       267
    -------------------------------------------
                               3,729     3,294
    -------------------------------------------
    Restructuring Charge
     (Reversal) (Note 10)          -         -
    -------------------------------------------
    Income Before Provision
     for (Recovery of) Income
     Taxes and Non-Controlling
     Interest in Subsidiaries    568       971
    Income taxes                 (53)       37
    -------------------------------------------
                                 621       934
    Non-controlling interest
     in subsidiaries              38        37
    -------------------------------------------
    Net Income             $     583 $     897
    -------------------------------------------
    -------------------------------------------

    Preferred share
     dividends             $      49 $      29
    Net income available
     to common
     shareholders          $     534 $     868
    Average common shares
     (in thousands)          531,631   500,544
    Average diluted common
     shares (in thousands)   532,418   506,099
    -------------------------------------------
    Earnings Per Share
     (Canadian $)
    Basic                  $    1.00 $    1.73
    Diluted                     1.00      1.72
    Dividends Declared
     Per Common Share           1.40      1.40
    -------------------------------------------
    -------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    Interim Consolidated Financial Statements

    Consolidated Balance Sheet


    (Unaudited)
     (Canadian $ in millions)                     As at
    -------------------------------------------------------------------------
                               April   January   October      July     April
                            30, 2009  31, 2009  31, 2008  31, 2008  30, 2008
    -------------------------------------------------------------------------
    Assets
    Cash Resources         $  14,232 $  26,390 $  21,105 $  22,054 $  22,237
    -------------------------------------------------------------------------
    Securities
    Trading                   66,704    61,752    66,032    63,628    64,443
    Available-for-sale        39,295    35,189    32,115    23,426    22,453
    Other                      1,501     1,517     1,991     1,821     1,774
    -------------------------------------------------------------------------
                             107,500    98,458   100,138    88,875    88,670
    -------------------------------------------------------------------------
    Securities Borrowed or
     Purchased Under
     Resale Agreements        38,521    32,283    28,033    32,433    33,596
    -------------------------------------------------------------------------
    Loans
    Residential mortgages     48,100    50,107    49,343    51,757    52,583
    Consumer instalment and
     other personal           44,316    44,355    43,737    40,292    37,954
    Credit cards               2,100     2,105     2,120     3,532     4,338
    Businesses and
     governments              77,271    84,557    84,151    71,961    67,942
    -------------------------------------------------------------------------
                             171,787   181,124   179,351   167,542   162,817
    Customers' liability
     under acceptances         9,736    10,716     9,358     9,834    10,345
    Allowance for credit
     losses (Note 3)          (1,825)   (1,741)   (1,747)   (1,494)   (1,336)
    -------------------------------------------------------------------------
                             179,698   190,099   186,962   175,882   171,826
    -------------------------------------------------------------------------
    Other Assets
    Derivative instruments    77,473    81,985    65,586    43,167    44,557
    Premises and equipment
     (Note 2)                  1,684     1,709     1,721     1,582     1,570
    Goodwill                   1,670     1,706     1,635     1,449     1,398
    Intangible assets
     (Note 2)                    671       676       710       658       662
    Other                     10,796     9,868    10,160     8,947    10,642
    -------------------------------------------------------------------------
                              92,294    95,944    79,812    55,803    58,829
    -------------------------------------------------------------------------
    Total Assets           $ 432,245 $ 443,174 $ 416,050 $ 375,047 $ 375,158
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and
     Shareholders' Equity
    Deposits
    Banks                  $  27,874 $  31,422 $  30,346 $  29,988 $  30,938
    Businesses and
     governments             118,205   133,388   136,111   131,748   122,707
    Individuals              101,090    99,770    91,213    86,921    84,935
    -------------------------------------------------------------------------
                             247,169   264,580   257,670   248,657   238,580
    -------------------------------------------------------------------------
    Other Liabilities
    Derivative instruments    75,070    77,764    60,048    36,786    40,347
    Acceptances                9,736    10,716     9,358     9,834    10,345
    Securities sold but
     not yet purchased        14,131    16,327    18,792    17,415    20,053
    Securities lent or
     sold under repurchase
     agreements               46,170    36,012    32,492    28,148    29,894
    Other                     14,708    12,969    14,071    11,650    13,940
    -------------------------------------------------------------------------
                             159,815   153,788   134,761   103,833   114,579
    -------------------------------------------------------------------------
    Subordinated Debt
     (Note 11)                 4,379     4,389     4,315     4,204     4,199
    -------------------------------------------------------------------------
    Capital Trust Securities   1,150     1,150     1,150     1,150     1,150
    -------------------------------------------------------------------------
    Preferred Share Liability
     (Note 12)                     -         -       250       250       250
    -------------------------------------------------------------------------
    Shareholders' Equity
    Share capital (Note 12)    8,099     7,676     6,454     6,458     6,114
    Contributed surplus           77        76        69        68        67
    Retained earnings         11,391    11,434    11,632    11,471    11,327
    Accumulated other
     comprehensive income
     (loss)                      165        81      (251)   (1,044)   (1,108)
    -------------------------------------------------------------------------
                              19,732    19,267    17,904    16,953    16,400
    -------------------------------------------------------------------------
    Total Liabilities and
     Shareholders' Equity  $ 432,245 $ 443,174 $ 416,050 $ 375,047 $ 375,158
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    Interim Consolidated Financial Statements

    Consolidated Statement of Comprehensive Income


    (Unaudited)                       For the three           For the six
     (Canadian $ in millions)          months ended          months ended
    -------------------------------------------------------------------------
                                   April 30,  April 30,  April 30,  April 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net income                    $     358  $     642  $     583  $     897
    Other Comprehensive Income
      Net change in unrealized
       gains on available-for-
       sale securities                  181         77        247         75
      Net change in unrealized
       gains on cash flow hedges         27         80        219        144
      Net gain (loss) on
       translation of net foreign
       operations                      (124)         4        (50)       206
    -------------------------------------------------------------------------
    Total Comprehensive Income    $     442  $     803  $     999  $   1,322
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statement of Changes in Shareholders' Equity


    (Unaudited)                       For the three           For the six
     (Canadian $ in millions)          months ended          months ended
    -------------------------------------------------------------------------
                                   April 30,  April 30,  April 30,  April 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Preferred Shares
    Balance at beginning of
     period                       $   1,896  $   1,196  $   1,746  $   1,196
    Issued during the period
     (Note 12)                          275        250        425        250
    -------------------------------------------------------------------------
    Balance at End of Period          2,171      1,446      2,171      1,446
    -------------------------------------------------------------------------
    Common Shares
    Balance at beginning of period    5,818      4,452      4,773      4,411
    Issued during the period
     (Note 12)                            -          -      1,000          -
    Issued under the Shareholder
     Dividend Reinvestment and
     Share Purchase Plan                103         27        138         55
    Issued under the Stock
     Option Plan                          7          9         17         22
    Issued on the acquisition
     of a business                        -        180          -        180
    -------------------------------------------------------------------------
    Balance at End of Period          5,928      4,668      5,928      4,668
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period       76         65         69         58
    Stock option expense/exercised        1          2          6          9
    Premium on treasury shares            -          -          2          -
    -------------------------------------------------------------------------
    Balance at End of Period             77         67         77         67
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period   11,434     11,056     11,632     11,166
    Net income                          358        642        583        897
    Dividends - Preferred shares        (26)       (14)       (49)       (29)
              - Common shares          (382)      (352)      (760)      (702)
    Share issue expense                  (4)        (5)       (26)        (5)
    Treasury shares                      11          -         11          -
    -------------------------------------------------------------------------
    Balance at End of Period         11,391     11,327     11,391     11,327
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Income on
     Available-for-Sale Securities
    Balance at beginning of period       (8)        33        (74)        35
    Unrealized gains on available-
     for-sale securities arising
     during the period (net of
     income taxes of $138, $29,
     $118 and $17)                      211         60        167         35
    Reclassification to earnings
     of (gains) losses in the
     period (net of income taxes
     of $19, $9, $33 and $19)           (30)        17         80         40
    -------------------------------------------------------------------------
    Balance at End of Period            173        110        173        110
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Income (Loss)
     on Cash Flow Hedges
    Balance at beginning of period      450       (102)       258       (166)
    Gains on cash flow hedges
     arising during the period
     (net of income taxes of
     $17, $37, $95 and $52)              25         77        218        104
    Reclassification to earnings
     of losses on cash flow hedges
     (net of income taxes of less
     than $1, $2, $1 and $19)             2          3          1         40
    -------------------------------------------------------------------------
    Balance at End of Period            477        (22)       477        (22)
    -------------------------------------------------------------------------
    Accumulated Other
     Comprehensive Loss on
     Translation of Net Foreign
     Operations
    Balance at beginning of period     (361)    (1,200)      (435)    (1,402)
    Unrealized gain (loss) on
     translation of net foreign
     operations                        (363)        26       (135)       618
    Impact of hedging unrealized
     gain (loss) on translation
     of net foreign operations
     (net of income taxes of
     $104, $11, $38 and $196)           239        (22)        85       (412)
    -------------------------------------------------------------------------
    Balance at End of Period           (485)    (1,196)      (485)    (1,196)
    -------------------------------------------------------------------------
    Total Accumulated Other
     Comprehensive Income (Loss)        165     (1,108)       165     (1,108)
    -------------------------------------------------------------------------
    Total Shareholders' Equity    $  19,732  $  16,400  $  19,732  $  16,400
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.



    Interim Consolidated Financial Statements

    Consolidated Statement of Cash Flows


    (Unaudited)                       For the three           For the six
     (Canadian $ in millions)          months ended          months ended
    -------------------------------------------------------------------------
                                   April 30,  April 30,  April 30,  April 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Cash Flows from Operating
     Activities
    Net income                    $     358  $     642  $     583  $     897
    Adjustments to determine
     net cash flows provided by
     (used in) operating
     activities
      Write-down of securities,
       other than trading                17         35        258         74
      Net loss (gain) on
       securities, other than
       trading                           25        (49)        98        (86)
      Net (increase) decrease in
       trading securities            (2,786)      (846)     2,094      8,352
      Provision for credit losses       372        151        800        381
      (Gain) on sale of
       securitized loans (Note 4)      (208)      (116)      (390)      (175)
      Change in derivative
       instruments
        - (Increase) decrease in
          derivative asset            3,645     (7,425)   (12,423)   (10,867)
        - Increase (decrease) in
          derivative liability       (1,241)     7,448     15,937      5,567
      Amortization of premises
       and equipment                     65         62        130        123
      Amortization of intangible
       assets                            54         45        105         90
      Net (increase) decrease
       in future income taxes            42         28        (88)        43
      Net (increase) decrease
       in current income taxes          211        (66)       190       (527)
      Change in accrued interest
       - Decrease in interest
         receivable                      57         87        266        330
       - (Decrease) in interest
         payable                        (47)      (207)      (184)      (262)
      Changes in other items and
       accruals, net                 (1,291)    (1,495)    (1,805)    (2,468)
      (Gain) on sale of land and
       buildings                         (5)         -         (5)         -
    -------------------------------------------------------------------------
    Net Cash Provided by (Used in)
     Operating Activities              (732)    (1,706)     5,566      1,472
    -------------------------------------------------------------------------
    Cash Flows from Financing
     Activities
    Net (decrease) in deposits      (14,363)    (6,483)    (9,444)    (2,275)
    Net (decrease) in securities
     sold but not yet purchased      (2,104)    (8,335)    (4,692)    (5,248)
    Net increase (decrease) in
     securities lent or sold
     under repurchase agreements     11,537      1,099     14,919     (2,803)
    Net increase (decrease) in
     liabilities of subsidiaries       (113)     1,221       (113)     2,886
    Repayment of subordinated
     debt (Note 11)                       -       (150)      (140)      (150)
    Proceeds from issuance of
     subordinated debt (Note 11)          -        900          -        900
    Redemption of preferred
     share liability                      -          -       (250)         -
    Proceeds from issuance of
     preferred shares (Note 12)         275        250        425        250
    Proceeds from issuance of
     common shares (Note 12)              7          9      1,017         22
    Share issue expense                  (4)        (5)       (26)        (5)
    Cash dividends paid                (305)      (339)      (671)      (676)
    -------------------------------------------------------------------------
    Net Cash Provided by (Used in)
     Financing Activities            (5,070)   (11,833)     1,025     (7,099)
    -------------------------------------------------------------------------
    Cash Flows from Investing
     Activities
    Net decrease in interest
     bearing deposits with banks      5,793      4,016      8,316      1,270
    Purchases of securities,
     other than trading             (12,467)    (6,108)   (24,327)   (12,934)
    Maturities of securities,
     other than trading               2,123      6,728      6,153     12,194
    Proceeds from sales of
     securities, other than trading   5,562      1,826     11,273      5,798
    Net (increase) decrease
     in loans                         5,368     (5,082)      (130)    (9,039)
    Proceeds from securitization
     of loans (Note 4)                  944      2,600      5,581      3,145
    Net (increase) decrease in
     securities borrowed or
     purchased under resale
     agreements                      (7,268)     9,749    (11,347)     4,840
    Proceeds from sales of land
     and buildings                       11          -         11          -
    Premises and equipment
     - net purchases                    (46)       (71)       (87)      (104)
    Purchased and developed
     software - net purchases           (42)       (32)       (88)       (59)
    Acquisitions (Note 8)              (310)       (64)      (316)      (104)
    -------------------------------------------------------------------------
    Net Cash Provided By (Used in)
     Investing Activities              (332)    13,562     (4,961)     5,007
    -------------------------------------------------------------------------
    Effect of Exchange Rate
     Changes on Cash and Cash
     Equivalents                       (570)        28       (517)       118
    -------------------------------------------------------------------------
    Net Increase (Decrease) in
     Cash and Cash Equivalents       (6,704)        51      1,113       (502)
    Cash and Cash Equivalents at
     Beginning of Period             16,951      3,097      9,134      3,650
    -------------------------------------------------------------------------
    Cash and Cash Equivalents at
     End of Period                $  10,247  $   3,148  $  10,247  $   3,148
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Represented by:
    Cash and non-interest bearing
     deposits with Bank of Canada
     and other banks              $   9,007  $   1,949  $   9,007  $   1,949
    Cheques and other items in
     transit, net                     1,240      1,199      1,240      1,199
    -------------------------------------------------------------------------
                                  $  10,247  $   3,148  $  10,247  $   3,148
    -------------------------------------------------------------------------
    Supplemental Disclosure of
     Cash Flow Information
    Amount of interest paid
     in the period                $   1,270  $   2,660  $   3,207  $   5,706
    Amount of income taxes paid
     (refunded) in the period     $    (146) $     244  $      (6) $     608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes are an integral part of these interim consolidated
    financial statements.
    Certain comparative figures have been reclassified to conform with the
    current period's presentation.



    Notes to Consolidated Financial Statements

    April 30, 2009 (Unaudited)
    -------------------------------------------------------------------------

    Note 1: Basis of Presentation

    These interim consolidated financial statements should be read in
    conjunction with the notes to our annual consolidated financial
    statements for the year ended October 31, 2008 as set out on pages 108 to
    151 of our 2008 Annual Report. These interim consolidated financial
    statements have been prepared in accordance with Canadian generally
    accepted accounting principles ("GAAP") using the same accounting
    policies and methods of computation as were used for our annual
    consolidated financial statements for the year ended October 31, 2008,
    except as described in Note 2.

    Note 2: Change in Accounting Policy

    On November 1, 2008, we adopted the Canadian Institute of Chartered
    Accountants' ("CICA") new accounting requirements for goodwill and
    intangible assets. We have restated prior periods' financial statements
    for this change. The new rules required us to reclassify certain computer
    software from premises and equipment to intangible assets.

    The impact of this change in accounting policy on the current and prior
    periods is as follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                               April   January   October      July     April
                            30, 2009  31, 2009  31, 2008  31, 2008  30, 2008
    -------------------------------------------------------------------------
    Consolidated Balance
     Sheet
      (Decrease) in Premises
       and Equipment        $   (510) $   (515) $   (506) $   (469) $   (454)
      Increase in
       Intangible Assets         510       515       506       469       454
    -------------------------------------------------------------------------
    Consolidated Statement
     of Income
      (Decrease) in Premises
       and Equipment        $    (42) $    (41) $    (37) $    (34) $    (35)
      Increase in
       Amortization of
       Intangible Assets          42        41        37        34        35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following table outlines the restated software intangible assets for
    the current and prior periods:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                               April   January   October      July     April
                            30, 2009  31, 2009  31, 2008  31, 2008  30, 2008
    -------------------------------------------------------------------------
    Intangible Assets
      Purchased
       Software(1)          $  1,006  $  1,009  $  1,003  $    980  $    974
      Developed
       Software(1)(2)            774       743       696       614       567
    -------------------------------------------------------------------------
      Software Intangible
       Assets                  1,780     1,752     1,699     1,594     1,541
    -------------------------------------------------------------------------
      Accumulated
       Amortization           (1,270)   (1,237)   (1,193)   (1,125)   (1,087)
    -------------------------------------------------------------------------
      Carrying Value        $    510  $    515  $    506  $    469  $    454
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Amortized on a straight-line basis over its useful life up to a
        maximum of five years.
    (2) Includes $55 million as at April 30, 2009, $58 million as at
        January 31, 2009, $55 million as at October 31, 2008, $57 million as
        at July 31, 2008, and $51 million as at April 30, 2008 of software in
        development which is not subject to amortization.

    Note 3: Allowance for Credit Losses

    The allowance for credit losses recorded in our Consolidated Balance
    Sheet is maintained at a level which we consider adequate to absorb
    credit-related losses on our loans, customers' liability under
    acceptances and other credit instruments. The portion related to other
    credit instruments is recorded in other liabilities in our Consolidated
    Balance Sheet. As at April 30, 2009 and April 30, 2008, there was no
    allowance for credit losses related to other credit instruments included
    in other liabilities.

    A continuity of our allowance for credit losses is as follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                          Credit card,
                                      consumer instalment
                       Residential         and other          Business and
                        mortgages       personal loans      government loans
    -------------------------------------------------------------------------
    For the three    April     April     April     April     April     April
     months ended 30, 2009  30, 2008  30, 2009  30, 2008  30, 2009  30, 2008
    -------------------------------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $     16  $     15  $      1  $      1  $    390  $    234
    Provision for
     credit losses       6        (1)      169        69       197        83
    Recoveries           -         -        22        27        10         8
    Write-offs          (1)       (2)     (149)      (96)     (141)      (14)
    Foreign
     exchange
     and other           -         -         -         -        (9)        1
    -------------------------------------------------------------------------
    Specific
     Allowance at
     end of period      21        12        43         1       447       312
    -------------------------------------------------------------------------

    General
     Allowance at
     beginning of
     period             21         8       258       357     1,015       572
    Provision for
     credit losses       -        (1)      (22)      (41)       14        30
    Foreign
     exchange
     and other           -         -         -         -       (20)       34
    -------------------------------------------------------------------------
    General
     Allowance at
     end of period      21         7       236       316     1,009       636
    -------------------------------------------------------------------------
    Total
     Allowance    $     42  $     19  $    279  $    317  $  1,456  $    948
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -----------------------------------------------------
                       Customers'
                       liability
                   under acceptances          Total
    -----------------------------------------------------
    For the three    April     April     April     April
     months ended 30, 2009  30, 2008  30, 2009  30, 2008
    -----------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $      -  $      -  $    407  $    250
    Provision for
     credit losses       -         -       372       151
    Recoveries           -         -        32        35
    Write-offs           -         -      (291)     (112)
    Foreign
     exchange
     and other           -         -        (9)        1
    -----------------------------------------------------
    Specific
     Allowance at
     end of period       -         -       511       325
    -----------------------------------------------------

    General
     Allowance at
     beginning of
     period             40        40     1,334       977
    Provision for
     credit losses       8        12         -         -
    Foreign
     exchange
     and other           -         -       (20)       34
    -----------------------------------------------------
    General
     Allowance at
     end of period      48        52     1,314     1,011
    -----------------------------------------------------
    Total
     Allowance    $     48  $     52  $  1,825  $  1,336
    -----------------------------------------------------
    -----------------------------------------------------


    -------------------------------------------------------------------------
                                          Credit card,
                                      consumer instalment
                       Residential         and other          Business and
                        mortgages       personal loans      government loans
    -------------------------------------------------------------------------
    For the six      April     April     April     April     April     April
     months ended 30, 2009  30, 2008  30, 2009  30, 2008  30, 2009  30, 2008
    -------------------------------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $     13  $     14  $      2  $      1  $    411  $    142
    Provision for
     credit losses       9         -       298       137       493       184
    Recoveries           -         -        50        46        18        11
    Write-offs          (1)       (2)     (307)     (183)     (474)      (29)
    Foreign
     exchange
     and other           -         -         -         -        (1)        4
    -------------------------------------------------------------------------
    Specific
     Allowance at
     end of period      21        12        43         1       447       312
    -------------------------------------------------------------------------

    General
     Allowance at
     beginning of
     period              8        11       242       327     1,030       517
    Provision for
     credit losses      13        (4)       (6)      (11)      (14)       66
    Foreign
     exchange
     and other           -         -         -         -        (7)       53
    -------------------------------------------------------------------------
    General
     Allowance at
     end of period      21         7       236       316     1,009       636
    -------------------------------------------------------------------------
    Total
     Allowance    $     42  $     19  $    279  $    317  $  1,456  $    948
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -----------------------------------------------------
                       Customers'
                       liability
                   under acceptances          Total
    -----------------------------------------------------
    For the six      April     April     April     April
     months ended 30, 2009  30, 2008  30, 2009  30, 2008
    -----------------------------------------------------
    Specific
     Allowance at
     beginning of
     period       $      -  $      -  $    426  $    157
    Provision for
     credit losses       -         -       800       321
    Recoveries           -         -        68        57
    Write-offs           -         -      (782)     (214)
    Foreign
     exchange
     and other           -         -        (1)        4
    -----------------------------------------------------
    Specific
     Allowance at
     end of period       -         -       511       325
    -----------------------------------------------------

    General
     Allowance at
     beginning of
     period             41        43     1,321       898
    Provision for
     credit losses       7         9         -        60
    Foreign
     exchange
     and other           -         -        (7)       53
    -----------------------------------------------------
    General
     Allowance at
     end of period      48        52     1,314     1,011
    -----------------------------------------------------
    Total
     Allowance    $     48  $     52  $  1,825  $  1,336
    -----------------------------------------------------
    -----------------------------------------------------

    Note 4: Securitization

    The following tables summarize our securitization activity related to our
    assets and its impact on our Consolidated Statement of Income for the
    three and six months ended April 30, 2009 and 2008:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                      Residential
                       mortgages       Credit card loans          Total
    -------------------------------------------------------------------------
    For the three    April     April     April     April     April     April
     months ended 30, 2009  30, 2008  30, 2009  30, 2008  30, 2009  30, 2008
    -------------------------------------------------------------------------
    Net cash
     proceeds(1)  $    932  $  2,063  $      -  $    525  $    932  $  2,588
    Investment in
     securiti-
     zation
     vehicles(2)         -         -         -        24         -        24
    Deferred
     purchase
     price              58       110         -        13        58       123
    Servicing
     liability          (4)      (15)        -        (2)       (4)      (17)
    -------------------------------------------------------------------------
                       986     2,158         -       560       986     2,718
    Loans sold         950     2,112         -       550       950     2,662
    -------------------------------------------------------------------------
    Gain on sale
     of loans
     from new
     securiti-
     zations      $     36  $     46  $      -  $     10  $     36  $     56
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gain on sale
     of loans sold
     to revolving
     securiti-
     zation
     vehicles     $     51  $     20  $    121  $     40  $    172  $     60
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                      Residential
                       mortgages       Credit card loans          Total
    -------------------------------------------------------------------------
    For the six      April     April     April     April     April     April
     months ended 30, 2009  30, 2008  30, 2009  30, 2008  30, 2009  30, 2008
    -------------------------------------------------------------------------
    Net cash
     proceeds(1)  $  5,549  $  2,611  $      -  $    525  $  5,549  $  3,136
    Investment in
     securiti-
     zation
     vehicles(2)         -         -         -        24         -        24
    Deferred
     purchase
     price             147       134         -        13       147       147
    Servicing
     liability         (24)      (19)        -        (2)      (24)      (21)
    -------------------------------------------------------------------------
                     5,672     2,726         -       560     5,672     3,286
    Loans sold       5,610     2,675         -       550     5,610     3,225
    -------------------------------------------------------------------------
    Gain on sale
     of loans
     from new
     securiti-
     zations      $     62  $     51  $      -  $     10  $     62  $     61
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Gain on sale
     of loans sold
     to revolving
     securiti-
     zation
     vehicles     $     91  $     35  $    237  $     79  $    328  $    114
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net cash proceeds represent cash proceeds less issuance costs.
    (2) Includes credit card securities retained on-balance sheet by the
        Bank.

    The key weighted-average assumptions used to value the deferred purchase
    price for the new securitizations were as follows:

    -------------------------------------------------------------------------
                                          Residential
                                          mortgages(1)   Credit card loans(2)
    -------------------------------------------------------------------------
    For the three                        April     April     April     April
     months ended                     30, 2009  30, 2008  30, 2009  30, 2008
    -------------------------------------------------------------------------
    Weighted-average life (years)         4.40      4.44         -      0.35
    Prepayment rate (%)                  14.00     14.00         -     40.77
    Interest rate (%)                     5.49      5.64         -     21.28
    Expected credit losses                   -         -         -      2.31
    Discount rate (%)                     2.74      4.15         -     10.39
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                          Residential
                                          mortgages(1)   Credit card loans(2)
    -------------------------------------------------------------------------
    For the six                          April     April     April     April
     months ended                     30, 2009  30, 2008  30, 2009  30, 2008
    -------------------------------------------------------------------------
    Weighted-average life (years)         3.24      4.44         -      0.35
    Prepayment rate (%)                  25.49     13.16         -     40.77
    Interest rate (%)                     4.25      5.55         -     21.28
    Expected credit losses                   -         -         -      2.31
    Discount rate (%)                     2.52      4.28         -     10.39
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) As the residential mortgages are fully insured, there are no expected
        credit losses.
    (2) There were no credit card securitization transactions in the three
        and six months ended April 30, 2009.

    Note 5: Variable Interest Entities

    Canadian Customer Securitization Vehicles

    Customer securitization vehicles (also referred to as bank-sponsored
    multi-seller conduits) assist our customers with the securitization of
    their assets to provide them with alternate sources of funding.

    Assets held by our unconsolidated Canadian customer securitization
    vehicles amounted to $8,423 million as at April 30, 2009 ($11,106 million
    as at October 31, 2008). Our exposure to losses relates to our investment
    in commercial paper issued by the vehicles, derivative contracts we have
    entered into with the vehicles and the liquidity support we provide
    through backstop liquidity facilities. As at April 30, 2009, we had an
    exposure of $1,223 million from commercial paper held ($2,139 million as
    at October 31, 2008) classified as trading securities. The total undrawn
    backstop liquidity facilities were $8,682 million as at April 30, 2009
    ($11,040 million as at October 31, 2008). No amounts have been drawn
    against the facilities as at April 30, 2009 and October 31, 2008. The
    fair value of derivatives outstanding with these Variable Interest
    Entities ("VIEs") was recorded in our Consolidated Balance Sheet as a
    derivative asset of $75 million as at April 30, 2009 (derivative asset of
    $55 million as at October 31, 2008).

    Included in our Consolidated Balance Sheet as at April 30, 2009, were
    assets of $218 million classified as other assets ($265 million as at
    October 31, 2008) relating to two VIEs we consolidate as we absorb the
    majority of the expected losses. Subsequent to quarter end, we
    increased our funding of customer securitization vehicles by an
    additional $1 billion by refinancing two programs and as a result will
    consolidate approximately $670 million of assets in the third quarter of
    2009.

    U.S. Customer Securitization Vehicle

    Assets held by our unconsolidated U.S. customer securitization vehicle
    amounted to $6,583 million (US$5,518 million) as at April 30, 2009
    ($7,993 million or US$6,636 million as at October 31, 2008). Our exposure
    to losses in our U.S. customer securitization vehicle relates to
    liquidity support we provide through liquidity facilities. As at April
    30, 2009, our exposure related to undrawn backstop liquidity facilities
    amounted to $7,923 million (US$6,641 million) ($10,015 million or
    US$8,315 million as at October 31, 2008). As at April 30, 2009, we have
    provided funding of US$851 million in accordance with the terms of these
    liquidity facilities (US$851 million as at October 31, 2008). The fair
    value of derivatives outstanding with this vehicle was recorded in our
    Consolidated Balance Sheet as a derivative asset of $1 million
    (US$1 million) as at April 30, 2009 (derivative asset of $1 million or
    US$1 million as at October 31, 2008). We are not required to consolidate
    our U.S. customer securitization vehicle.

    Bank Securitization Vehicles

    We use bank securitization vehicles to securitize our Canadian mortgage
    loans and Canadian credit card loans to obtain alternate sources of
    funding. Total assets held by these vehicles amounted to $9,719 million
    as at April 30, 2009 ($9,719 million as at October 31, 2008), all of
    which relate to assets in Canada. We are not required to consolidate our
    bank securitization vehicles. We also provide liquidity support to our
    Canadian mortgage bank securitization vehicles for the face value of the
    commercial paper outstanding.

    The total contract amount of the liquidity support was $5,100 million as
    at April 30, 2009 and October 31, 2008. No amounts were drawn as at
    April 30, 2009 and October 31, 2008. As at April 30, 2009, we held
    $250 million of the commercial paper issued by these vehicles
    ($509 million as at October 31, 2008) which was classified as trading
    securities.

    The fair value of derivatives we have outstanding with these vehicles was
    recorded in our Consolidated Balance Sheet as a derivative asset of
    $164 million as at April 30, 2009 (derivative asset of $121 million as at
    October 31, 2008).

    Credit Protection Vehicle

    We sponsor Apex Trust ("Apex"), a VIE that provides credit protection to
    investors on investments in corporate debt portfolios through credit
    default swaps. Assets held by Apex were $2,880 million as at April 30,
    2009 ($2,794 million as at October 31, 2008). A senior funding facility
    of $1,130 million is available to Apex, of which we provide
    $1,030 million. As at April 30, 2009, $632 million had been drawn against
    our facility ($553 million as at October 31, 2008). We have also
    authorized a senior demand facility for Apex of $1 billion. No amounts
    have been drawn against this facility. We have entered into credit
    default swaps with swap counterparties and offsetting swaps with Apex.

    As a result of guidance issued by the CICA relating to the notes issued
    on the restructuring of the Montreal Accord, we reclassified $815 million
    of Apex mid-term notes ("MTNs") from available-for-sale securities to
    trading securities. As at April 30, 2009, we had recorded the MTNs at a
    fair value of $407 million ($625 million as at October 31, 2008). A third
    party holds its exposure to Apex through a total return swap with us on
    $600 million of MTNs. The total return swap and underlying MTNs are
    classified as trading instruments. We are not required to consolidate
    Apex.

    Structured Investment Vehicles

    Structured investment vehicles ("SIVs") provide investment opportunities
    in customized, diversified debt portfolios in a variety of asset and
    rating classes. We hold interests in two SIVs and act as asset manager.
    Assets held by these SIVs totalled $7,024 million as at April 30, 2009
    (total assets of $9,291 million as at October 31, 2008).

    Our exposure to loss relates to our investments in these vehicles,
    derivative contracts we have entered into with the vehicles and senior
    funding we provide through a liquidity facility in order to fund the
    repayment of senior notes. Our investment in the capital notes of the
    SIVs is recorded in available-for-sale securities in our Consolidated
    Balance Sheet, and was $nil as at April 30, 2009 and October 31, 2008.
    Amounts drawn on the liquidity facility provided to the SIVs totalled
    $7,379 million as at April 30, 2009 ($5,208 million as at October 31,
    2008). Our exposure includes undrawn facilities of $1,934 million as at
    April 30, 2009 ($5,063 million as at October 31, 2008). The fair value of
    the derivative contracts we have outstanding with the SIVs was recorded
    in our Consolidated Balance Sheet as a derivative asset of $44 million as
    at April 30, 2009 (derivative asset of $57 million as at October 31,
    2008). We are not required to consolidate these SIVs.

    Note 6: Financial Instruments

    Change in Accounting Policy

    On August 1, 2008, we elected to transfer securities from trading to
    available-for-sale for which we had a change in intent caused by current
    market circumstances to hold the securities for the foreseeable future
    rather than to exit or trade them in the short term.

    A continuity of the transferred securities is as follows:

                                                                     For the
                                                For the three     six months
    (Canadian $ in millions)                     months ended          ended
    -------------------------------------------------------------------------
                                            April 30, January 31,   April 30,
                                                2009        2009        2009
    -------------------------------------------------------------------------
    Fair value of securities at
     beginning of period                  $    1,737  $    1,955  $    1,955
    Net (sales/maturities) purchases             (54)       (222)       (276)
    Fair value change recorded in Other
     Comprehensive Income                         93          31         124
    Other than temporary impairment
     recorded in income                           (8)        (50)        (58)
    Impact of foreign exchange                   (36)         23         (13)
    -------------------------------------------------------------------------
    Fair value of securities at end
     of period                            $    1,732  $    1,737  $    1,732
    -------------------------------------------------------------------------

    Fair Value Measurement

    We use a fair value hierarchy to categorize the inputs we use in
    valuation techniques to measure fair value. The extent of our use of
    quoted market prices (Level 1), internal models using observable market
    information as inputs (Level 2) and internal models without observable
    market information (Level 3) in the valuation of securities, fair value
    liabilities, derivative assets and derivative liabilities were as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                  Available-for-sale        Trading           Fair value
                      securities           securities         liabilities
    -------------------------------------------------------------------------
                     April   October     April   October     April   October
                  30, 2009  31, 2008  30, 2009  31, 2008  30, 2009  31, 2008
    -------------------------------------------------------------------------
    Valued using
     quoted market
     prices       $ 21,836  $  9,044  $ 63,955  $ 64,129  $ 14,131  $ 18,792
    Valued using
     internal
     models (with
     observable
     inputs)        15,542    20,873     1,553     1,441     1,131     1,070
    Valued using
     internal
     models
     (without
     observable
     inputs)         1,917     2,198     1,196       462         -         -
    -------------------------------------------------------------------------
    Total         $ 39,295  $ 32,115  $ 66,704  $ 66,032  $ 15,262  $ 19,862
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -----------------------------------------------------
                             Derivative Instruments
                  ---------------------------------------
                          Asset             Liability
    -----------------------------------------------------
                     April   October     April   October
                  30, 2009  31, 2008  30, 2009  31, 2008
    -----------------------------------------------------
    Valued using
     quoted market
     prices       $  3,951  $  6,170  $  3,081  $  2,096
    Valued using
     internal
     models (with
     observable
     inputs)        71,767    57,601    71,543    57,568
    Valued using
     internal
     models
     (without
     observable
     inputs)         1,755     1,815       446       384
    -----------------------------------------------------
    Total         $ 77,473  $ 65,586  $ 75,070  $ 60,048
    -----------------------------------------------------
    -----------------------------------------------------

    Sensitivity analysis for the most significant items valued using internal
    models without observable inputs is described below.

    Within trading securities as at April 30, 2009 was $407 million of Apex
    MTNs with a face value of $815 million (see Note 5). The valuation of
    these MTNs has been determined by management based on expected discounted
    cash flows. The determination of the discount rate used in the discounted
    cash flow model has the most significant impact on the valuation of the
    MTNs and is impacted by changes in credit spreads and the ratings of the
    underlying credit default swaps. The impact of assuming the discount rate
    increased or decreased by 50 basis points would result in a change in
    fair value of $(7) million and $7 million, respectively. The impact on
    income for the quarter ended April 30, 2009 related to changes in the
    fair value of our investment in Apex MTNs was a charge of $41 million
    before tax ($218 million before tax for the six months ended April 30,
    2009).

    A third party holds its exposure to the Apex MTNs through a total return
    swap with us. The valuations of this swap and the related underlying MTNs
    have been determined by management based on expected discounted cash
    flows. The determination of the discount rate used in the discounted cash
    flow model has the most significant impact on the valuation of the swap
    and underlying securities, and is impacted by changes in credit spreads
    and the ratings of the underlying credit default swaps. During the
    quarter, we renegotiated the total return swap which will significantly
    reduce the earnings volatility associated with the total return swap
    transaction.

    Within trading securities as at April 30, 2009 was $145 million (face
    value $323 million) of notes related to the Montreal Accord. The
    valuation of these notes has been determined by management based on
    expected discounted cash flows. The determination of the discount rate
    used in the discounted cash flow model has the most significant impact on
    the valuation of the notes and is impacted by changes in credit spreads
    and the rating of the notes. The impact of assuming the discount rate
    increased or decreased by 50 basis points would result in a change in
    fair value of $(5) million and $5 million, respectively.

    Within derivative assets and derivative liabilities as at April 30, 2009
    was $1,029 million and $103 million, respectively, related to the
    mark-to-market of credit default swaps and total return swaps on
    structured products. The valuation of these derivatives has been
    determined by management based on estimates of current market spreads for
    similar structured products. The impact of assuming a 10 basis point
    increase or decrease in that spread would result in a change in fair
    value of $(5) million and $5 million, respectively. The impact on income
    for the quarter ended April 30, 2009 related to changes in the fair value
    of these derivatives was income of $25 million before tax ($31 million
    before tax for the six months ended April 30, 2009).

    Financial Liabilities Designated as Held for Trading

    The fair value and amount due at contractual maturity of structured notes
    accounted for as held for trading as at April 30, 2009 were
    $1,131 million and $1,178 million, respectively ($1,070 million and
    $1,197 million, respectively, as at October 31, 2008).

    The change in fair value of these structured notes was a decrease in non-
    interest revenue, trading revenues of $72 million for the quarter ended
    April 30, 2009 ($87 million for the six months ended April 30, 2009). The
    portion of the change in fair value attributable to changes in credit
    risk was an unrealized loss of $88 million for the quarter ended
    April 30, 2009 ($66 million for the six months ended April 30, 2009). The
    portion of the change in fair value attributable to changes in credit
    risk was an unrealized gain of $49 million for the period from
    designation as held for trading to April 30, 2009.

    We manage our exposure to changes in the fair value of the structured
    notes by entering into offsetting derivative or other financial
    instrument contracts.

    Note 7: Guarantees

    In the normal course of business we enter into a variety of guarantees.
    The most significant guarantees are as follows:

    Standby Letters of Credit and Guarantees

    Standby letters of credit and guarantees represent our obligation to make
    payments to third parties on behalf of another party if that party is
    unable to make the required payments or meet other contractual
    requirements. The maximum amount payable under standby letters of credit
    and guarantees totalled $14,249 million as at April 30, 2009
    ($15,270 million as at October 31, 2008). Collateral requirements for
    standby letters of credit and guarantees are consistent with our
    collateral requirements for loans.

    No amount was included in our Consolidated Balance Sheet as at April 30,
    2009 and October 31, 2008 related to these standby letters of credit and
    guarantees.

    Backstop and Other Liquidity Facilities

    Backstop liquidity facilities are provided to Asset-Backed Commercial
    Paper ("ABCP") programs administered either by us or third parties as an
    alternative source of financing in the event that such programs are
    unable to access ABCP markets or when predetermined performance measures
    of the financial assets owned by these programs are not met. The terms of
    the backstop liquidity facilities do not require us to advance money to
    these programs in the event of bankruptcy of the borrower. The
    facilities' terms are generally no longer than one year, but can be
    several years.

    The maximum amount payable under these backstop and other liquidity
    facilities totalled $25,131 million as at April 30, 2009 ($32,806 million
    as at October 31, 2008). As at April 30, 2009, $1,287 million was drawn
    ($1,143 million as at October 31, 2008) in accordance with the terms of
    the backstop liquidity facilities, of which $1,015 million
    (US$851 million) ($1,025 million or US$851 million as at October 31,
    2008) related to the U.S. customer securitization vehicle discussed in
    Note 5.

    Credit Enhancement Facilities

    Where warranted, we provide partial credit enhancement facilities to
    transactions within ABCP programs administered either by us or third
    parties. As at April 30, 2009, credit enhancement facilities of
    $7,968 million ($6,243 million as at October 31, 2008) are included in
    backstop liquidity facilities. These facilities include amounts that
    relate to our U.S. customer securitization vehicle discussed in Note 5.

    Senior Funding Facilities

    We also provide senior funding support to our SIVs and our credit
    protection vehicle. The majority of these facilities support the
    repayment of senior note obligations of the SIVs. As at April 30, 2009,
    $8,011 million was drawn ($5,761 million as at October 31, 2008), in
    accordance with the terms of the funding facilities related to the SIVs
    and credit protection vehicle discussed in Note 5.

    In addition to our investment in the notes subject to the Montreal
    Accord, we have provided a senior loan facility of $300 million. No
    amounts were drawn as at April 30, 2009.

    Note 8: Acquisitions

    We account for acquisitions of businesses using the purchase method. This
    involves allocating the purchase price paid for a business to the assets
    acquired, including identifiable intangible assets, and the liabilities
    assumed, based on their fair values at the date of acquisition. Any
    excess is then recorded as goodwill. The results of operations of
    acquired businesses are included in our consolidated financial statements
    beginning on the date of acquisition.

    AIG Life Insurance Company of Canada

    On April 1, 2009, we completed the acquisition of AIG Life Insurance
    Company of Canada ("BMO Life Assurance"), for cash consideration of
    $330 million, subject to a post-closing adjustment based on net assets.
    The acquisition of BMO Life Assurance will provide our clients with a
    wider range of investment, financial planning and insurance solutions. As
    part of this acquisition, we acquired a customer relationship intangible
    asset which is being amortized on a straight-line basis over five years,
    a non-compete agreement which is being amortized on a straight-line basis
    over two years, a computer software intangible asset which is being
    amortized on a straight-line basis over five years, and existing computer
    software intangible assets which are being amortized on a straight-line
    basis over five years. Goodwill related to this acquisition is not
    deductible for tax purposes. BMO Life Assurance is part of our Private
    Client Group reporting segment.

    The estimated fair values of the assets acquired and the liabilities
    assumed at the date of acquisition are as follows:

                                                                    April 30,
    (Canadian $ in millions)                                            2009
    -------------------------------------------------------------------------
                                                                    BMO Life
                                                                   Assurance
    -------------------------------------------------------------------------
    Cash resources                                                 $     352
    Securities                                                         2,638
    Loans                                                                 54
    Premises and equipment                                                18
    Goodwill                                                               1
    Intangible assets                                                     15
    Other assets                                                         142
    -------------------------------------------------------------------------
    Total assets                                                       3,220
    -------------------------------------------------------------------------
    Other liabilities                                                  2,890
    -------------------------------------------------------------------------
    Total liabilities                                                  2,890
    -------------------------------------------------------------------------
    Purchase price                                                 $     330
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The allocation of the purchase price for BMO Life Assurance is subject to
    refinement as we complete the valuation of the assets acquired and
    liabilities assumed.

    Note 9: Employee Compensation

    Stock Options

    During the six months ended April 30, 2009, we granted a total of
    2,220,027 stock options. The weighted-average fair value of options
    granted during the six months ended April 30, 2009 was $5.57 per option.
    The following weighted-average assumptions were used to determine the
    fair value of options on the date of grant:

    For stock options granted during the six months ended April 30, 2009
    -------------------------------------------------------------------------
    Expected dividend yield                                              5.9%
    Expected share price volatility                                     23.8%
    Risk-free rate of return                                             2.6%
    Expected period until exercise (in years)                            6.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Changes to the input assumptions can result in materially different fair
    value estimates.

    Pension and Other Employee Future Benefit Expenses

    Pension and other employee future benefit expenses are determined as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                        Pension            Other employee
                                      benefit plans     future benefit plans
    -------------------------------------------------------------------------
                                   April 30,  April 30,  April 30,  April 30,
    For the three months ended         2009       2008       2009       2008
    -------------------------------------------------------------------------
    Benefits earned by employees  $      38  $      46  $       2  $       5
    Interest cost on accrued
     benefit liability                   65         56         14         12
    Actuarial loss recognized
     in expense                          19          2          -          3
    Amortization of plan
     amendment costs                      3          3         (2)        (2)
    Expected return on plan assets      (62)       (73)        (1)        (2)
    -------------------------------------------------------------------------
    Benefits expense                     63         34         13         16
    Canada and Quebec pension
     plan expense                        19         18          -          -
    Defined contribution expense          2          4          -          -
    -------------------------------------------------------------------------
    Total pension and other
     employee future benefit
     expenses                     $      84  $      56  $      13  $      16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                        Pension            Other employee
                                      benefit plans     future benefit plans
    -------------------------------------------------------------------------
                                   April 30,  April 30,  April 30,  April 30,
    For the six months ended           2009       2008       2009       2008
    -------------------------------------------------------------------------
    Benefits earned by employees  $      68  $      80  $       6  $      10
    Interest cost on accrued
     benefit liability                  131        114         26         25
    Actuarial loss recognized
     in expense                          38          6          -          6
    Amortization of plan
     amendment costs                      6          5         (4)        (3)
    Expected return on plan assets     (123)      (145)        (3)        (3)
    -------------------------------------------------------------------------
    Benefits expense                    120         60         25         35
    Canada and Quebec pension
     plan expense                        33         32          -          -
    Defined contribution expense          4          7          -          -
    -------------------------------------------------------------------------
    Total pension and other
     employee future benefit
     expenses                     $     157  $      99  $      25  $      35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10: Restructuring Charge

    The continuity of our 2007 restructuring charge is as follows:


    (Canadian $ in millions)                       Severance related charges
    -------------------------------------------------------------------------
    Opening Balance as at November 1, 2007                         $      96
    Paid in the year ended October 31, 2008                              (45)
    Reversal in the year ended October 31, 2008                           (8)
    -------------------------------------------------------------------------
    Balance as at October 31, 2008                                        43
    Paid in the quarter ended January 31, 2009                           (13)
    -------------------------------------------------------------------------
    Balance as at January 31, 2009                                        30
    Paid in the quarter ended April 30, 2009                              (7)
    -------------------------------------------------------------------------
    Balance as at April 30, 2009                                   $      23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 11: Subordinated Debt

    During the quarter ended January 31, 2009, our $140 million 10.85%
    Debentures, Series 12 matured.

    During the quarter ended January 31, 2009, we issued $450 million of BMO
    Tier 1 Notes - Series A ("BMO T1Ns - Series A"), due December 31, 2107,
    through BMO Capital Trust II ("Trust II"). Trust II is a variable
    interest entity which we are not required to consolidate; therefore, the
    BMO T1Ns - Series A issued by Trust II are not reported in our
    Consolidated Balance Sheet. Refer to Note 11 in our First Quarter Report
    to Shareholders for additional information on BMO T1Ns - Series A.

    During the quarter ended April 30, 2008, we issued $900 million of
    subordinated debt under our Canadian Medium-Term Note Program. The issue,
    Series F Medium-Term Notes, First Tranche, is due March 2023. Interest on
    this issue is payable semi-annually at a fixed rate of 6.17% until
    March 28, 2018, and at a floating rate equal to the rate on three month
    Bankers' Acceptances plus 2.50%, paid quarterly, thereafter to maturity.

    During the quarter ended April 30, 2008, we redeemed all of our 5.75%
    Series A Medium-Term Notes, Second Tranche, due 2013, totalling
    $150 million. The notes were redeemed at a redemption price of
    100 percent of the principal amount plus unpaid accrued interest to the
    redemption date.

    Note 12: Share Capital

    During the quarter ended April 30, 2009, we issued 11,000,000 6.5% Non-
    Cumulative 5-year Rate Reset Class B Preferred Shares, Series 21, at a
    price of $25.00 per share, representing an aggregate issue price of
    $275 million.

    During the quarter ended January 31, 2009, we issued 33,340,000 common
    shares at a price of $30.00 per share, representing an aggregate issue
    price of approximately $1.0 billion.

    During the quarter ended January 31, 2009, we issued 6,000,000 6.5% Non-
    Cumulative 5-year Rate Reset Class B Preferred Shares, Series 18, at a
    price of $25.00 per share, representing an aggregate issue price of
    $150 million.

    During the quarter ended January 31, 2009, we redeemed all our 10,000,000
    Non-Cumulative Class B Preferred Shares, Series 6 that were classified as
    preferred share liabilities, at a price of $25.00 per share plus any
    declared and unpaid dividends to the date of redemption. This represents
    an aggregate redemption price of approximately $253 million.

    During the quarter ended April 30, 2008, we issued 10,000,000 5.8%
    Non-Cumulative Perpetual Class B Preferred Shares, Series 15, at a price
    of $25.00 per share, representing an aggregate issue price of
    $250 million.

    During the quarters ended April 30, 2009 and April 30, 2008, we did not
    repurchase any common shares.

    We have not repurchased any common shares under the existing normal
    course issuer bid that expires on September 7, 2009 and pursuant to which
    we are permitted to purchase up to 15,000,000 common shares.

    Treasury Shares

    When we purchase our common shares as part of our trading business, we
    record the cost of those shares as a reduction in shareholders' equity.
    If those shares are resold at a value higher than their cost, the premium
    is recorded as an increase in contributed surplus. If those shares are
    resold at a value below their cost, the discount is recorded as a
    reduction first to contributed surplus and then to retained earnings for
    any amounts in excess of total contributed surplus related to treasury
    shares.

    Share Capital Outstanding(a)

    (Canadian $ in millions,
     except as noted)                                         April 30, 2009
    -------------------------------------------------------------------------
                             Number of shares   Amount   Convertible into...
    -------------------------------------------------------------------------
    Preferred Shares -
     Classified as Equity
      Class B - Series 5            8,000,000  $   200   -
      Class B - Series 10(c)       12,000,000      396   common shares(b)
      Class B - Series 13          14,000,000      350   -
      Class B - Series 14          10,000,000      250   -
      Class B - Series 15          10,000,000      250   -
      Class B - Series 16          12,000,000      300   -
      Class B - Series 18           6,000,000      150   -
      Class B - Series 21          11,000,000      275   -
    -------------------------------------------------------------------------
                                                 2,171
    Common Shares                 545,045,775    5,928
    -------------------------------------------------------------------------
    Share Capital                              $ 8,099
    -------------------------------------------------------------------------
    Stock options issued under
     stock option plan                             n/a   20,961,625 common
                                                          shares
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (a) For additional information refer to Notes 21 and 23 to our
        consolidated financial statements for the year ended October 31, 2008
        on pages 135 to 138 of our 2008 Annual Report.
    (b) The number of shares issuable on conversion is not determinable until
        the date of conversion.
    (c) Face value is US$300 million.
    n/a - not applicable

    Note 13: Capital Management

    Our capital management framework is designed to maintain the level of
    capital that: meets our target regulatory capital ratios; meets our
    internal assessment of required economic capital; is consistent with our
    targeted credit ratings; underpins our operating groups' business
    strategies; and builds long-term shareholder value.

    We have met our capital targets as at April 30, 2009. Our capital
    position as at April 30, 2009 is detailed in the Capital Management
    section on page 15 of Management's Discussion and Analysis of the Second
    Quarter Report to Shareholders.

    Note 14: Risk Management

    We have an enterprise-wide approach to the identification, measurement,
    monitoring and management of risks faced across the organization. The key
    financial instrument risks are classified as credit and counterparty,
    market, liquidity and funding risk.

    Credit and Counterparty Risk

    We are exposed to credit risk from the possibility that counterparties
    may default on their financial obligations to us. Credit risk arises
    predominantly with respect to loans, over-the-counter derivatives and
    other credit instruments. This is the most significant measurable risk
    that we face.

    Market Risk

    Market risk is the potential for a negative impact on the balance sheet
    and/or income statement resulting from adverse changes in the value of
    financial instruments as a result of changes in certain market variables.
    These variables include interest rates, foreign exchange rates, equity
    and commodity prices and their implied volatilities, as well as credit
    spreads, credit migration and default. We incur market risk in our
    trading and underwriting activities and structural banking activities.

    Liquidity and Funding Risk

    Liquidity and funding risk is the potential for loss if we are unable to
    meet financial commitments in a timely manner at reasonable prices as
    they fall due. It is our policy to ensure that sufficient liquid assets
    and funding capacity are available to meet financial commitments,
    including liabilities to depositors and suppliers, and lending,
    investment and pledging commitments, even in times of stress. Managing
    liquidity and funding risk is essential to maintaining both depositor
    confidence and stability in earnings.

    Key measures as at April 30, 2009 are outlined in the Risk Management
    section on pages 10 to 12 of Management's Discussion and Analysis of the
    Second Quarter Report to Shareholders.

    Note 15: United States Generally Accepted Accounting Principles

    Reporting under United States GAAP would have resulted in the following:


    (Canadian $ in millions,
     except earnings per share        For the three           For the six
     figures)                          months ended          months ended
    -------------------------------------------------------------------------
                                   April 30,  April 30,  April 30,  April 30,
                                       2009       2008       2009       2008
    -------------------------------------------------------------------------
    Net Income - Canadian GAAP    $     358  $     642  $     583  $     897
    United States GAAP adjustments       34         13        112         18
    -------------------------------------------------------------------------
    Net Income - United States
     GAAP                         $     392  $     655  $     695  $     915
    -------------------------------------------------------------------------
    Earnings Per Share
      Basic - Canadian GAAP       $    0.61  $    1.25  $    1.00  $    1.73
      Basic - United States GAAP       0.67       1.28       1.21       1.77
      Diluted - Canadian GAAP          0.61       1.25       1.00       1.72
      Diluted - United States GAAP     0.67       1.27       1.21       1.75
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Offsetting of Amounts Related to Certain Contracts

    During the quarter ended January 31, 2009, we adopted new United States
    guidance issued by the Financial Accounting Standards Board which permits
    an entity to offset recorded fair value amounts for cash collateral
    against the fair value of derivatives executed with the same counterparty
    under the same master netting arrangement. This new guidance did not have
    any impact on our United States GAAP reconciliation as our current policy
    on offsetting is consistent with this guidance.

    Note 16: Operating and Geographic Segmentation

    Operating Groups

    We conduct our business through operating groups, each of which has a
    distinct mandate. We determine our operating groups based on our
    management structure and therefore these groups, and results attributed
    to them, may not be comparable with those of other financial services
    companies. We evaluate the performance of our groups using measures such
    as net income, revenue growth, return on equity, net economic profit and
    non-interest expense-to-revenue (productivity) ratio, as well as cash
    operating leverage.

    Personal and Commercial Banking

    Personal and Commercial Banking ("P&C") is comprised of two operating
    segments: Personal and Commercial Banking Canada and Personal and
    Commercial Banking U.S.

    Personal and Commercial Banking Canada

    Personal and Commercial Banking Canada ("P&C Canada") offers a full range
    of consumer and business products and services, including: everyday
    banking, financing, investing, credit cards and insurance, as well as a
    full suite of commercial and capital market products and financial
    advisory services, through a network of branches, telephone banking,
    online banking, mortgage specialists and automated banking machines.

    Personal and Commercial Banking U.S.

    Personal and Commercial Banking U.S. ("P&C U.S.") offers a full range of
    products and services to personal and business clients in select U.S.
    Midwest markets through branches and direct banking channels such as
    telephone banking, online banking and a network of automated banking
    machines.

    Private Client Group

    Private Client Group ("PCG") brings together all of our wealth management
    businesses. Operating under the BMO brand in Canada and Harris in the
    United States, PCG serves a full range of client segments, from
    mainstream to ultra-high net worth, as well as select institutional
    market segments. We offer our clients a broad range of wealth management
    products and solutions, including full-service, online brokerage and
    insurance in Canada, and private banking and investment products in
    Canada and the United States. Effective in the third quarter of 2009, all
    of our insurance operations will operate within PCG.

    BMO Capital Markets

    BMO Capital Markets ("BMO CM") combines all of our businesses serving
    corporate, institutional and government clients. In Canada and the United
    States, its clients span a broad range of industry sectors. BMO CM also
    serves clients in the United Kingdom, Europe, Asia and Australia. It
    offers clients complete financial solutions, including equity and debt
    underwriting, corporate lending and project financing, mergers and
    acquisitions, advisory services, merchant banking, securitization,
    treasury and market risk management, debt and equity research and
    institutional sales and trading.

    Corporate Services

    Corporate Services includes the corporate units that provide expertise
    and governance support in areas such as strategic planning, law, finance,
    internal audit, risk management, corporate communications, economics,
    corporate marketing, human resources and learning. Operating results
    include revenues and expenses associated with certain securitization
    activities, the hedging of foreign-source earnings and activities related
    to the management of certain balance sheet positions and our overall
    asset liability structure.

    Technology and Operations ("T&O") manages, maintains and provides
    governance over our information technology, operations services, real
    estate and sourcing. T&O focuses on enterprise-wide priorities that
    improve quality and efficiency to deliver an excellent customer
    experience.

    Operating results for T&O are included with Corporate Services for
    reporting purposes. However, costs of T&O services are transferred to the
    three operating groups. As such, results for Corporate Services largely
    reflect the activities outlined above.

    Corporate Services also includes residual revenues and expenses
    representing the differences between actual amounts earned or incurred
    and the amounts allocated to operating groups.

    Basis of Presentation

    The results of these operating segments are based on our internal
    financial reporting systems. The accounting policies used in these
    segments are generally consistent with those followed in the preparation
    of our consolidated financial statements as disclosed in Notes 1 and 2.
    Notable accounting measurement differences are the taxable equivalent
    basis adjustment and the provision for credit losses, as described below.

    Taxable Equivalent Basis

    We analyze net interest income on a taxable equivalent basis ("teb") at
    the operating group level. This basis includes an adjustment which
    increases GAAP revenues and the GAAP provision for income taxes by an
    amount that would raise revenues on certain tax-exempt securities to a
    level that would incur tax at the statutory rate. The operating groups'
    teb adjustments are eliminated in Corporate Services.

    Analysis on a teb basis neutralizes the impact of investing in tax-exempt
    or tax-advantaged securities rather than fully taxable securities with
    higher yields. It reduces distortions in net interest income related to
    the choice of tax-advantaged and taxable investments.

    Provisions for Credit Losses

    Provisions for credit losses are generally allocated to each group based
    on expected losses for that group over an economic cycle. Differences
    between expected loss provisions and provisions required under GAAP are
    included in Corporate Services.

    Inter-Group Allocations

    Various estimates and allocation methodologies are used in the
    preparation of the operating groups' financial information. We allocate
    expenses directly related to earning revenue to the groups that earned
    the related revenue. Expenses not directly related to earning revenue,
    such as overhead expenses, are allocated to operating groups using
    allocation formulas applied on a consistent basis. Operating group net
    interest income reflects internal funding charges and credits on the
    groups' assets, liabilities and capital, at market rates, taking into
    account relevant terms and currency considerations. The offset of the net
    impact of these charges and credits is reflected in Corporate Services.

    Geographic Information

    We operate primarily in Canada and the United States but we also have
    operations in the United Kingdom, Europe, the Caribbean and Asia, which
    are grouped in Other countries. We allocate our results by geographic
    region based on the location of the unit responsible for managing the
    related assets, liabilities, revenues and expenses, except for the
    consolidated provision for credit losses, which is allocated based upon
    the country of ultimate risk.

    Our results and average assets, grouped by operating segment, are as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
    For the three
     months ended                                        Corporate     Total
     April 30,         P&C      P&C                         Servi-     (GAAP
     2009(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $    829  $    233  $    156  $    504  $   (385) $  1,337
    Non-interest
     revenue           463        59       291       308       197     1,318
    -------------------------------------------------------------------------
    Total Revenue    1,292       292       447       812      (188)    2,655
    Provision for
     credit losses      93        18         2        44       215       372
    Non-interest
     expense           702       234       353       451       148     1,888
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      497        40        92       317      (551)      395
    Income taxes       147        15        30        68      (242)       18
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        19        19
    -------------------------------------------------------------------------
    Net Income    $    350  $     25  $     62  $    249  $   (328) $    358
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $122,914  $ 33,361  $ 10,209  $280,583  $ 13,543  $460,610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    122  $  1,083  $    353  $    110  $      2  $  1,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the three
     months ended                                        Corporate     Total
     April 30,         P&C      P&C                         Servi-     (GAAP
     2008(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $    766  $    172  $    165  $    241  $   (170) $  1,174
    Non-interest
     revenue           432        85       345       451       133     1,446
    -------------------------------------------------------------------------
    Total Revenue    1,198       257       510       692       (37)    2,620
    Provision for
     credit losses      82        10         1        29        29       151
    Non-interest
     expense           654       200       350       441        35     1,680
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      462        47       159       222      (101)      789
    Income taxes       142        17        52        35      (118)      128
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        19        19
    -------------------------------------------------------------------------
    Net Income    $    320  $     30  $    107  $    187  $     (2) $    642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $124,694  $ 25,481  $  8,024  $231,812  $  4,058  $394,069
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    104  $    876  $    323  $     93  $      2  $  1,398
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the six
     months ended                                        Corporate     Total
     April 30,         P&C      P&C                         Servi-     (GAAP
     2009(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $  1,654  $    473  $    334  $  1,020  $   (813) $  2,668
    Non-interest
     revenue           912       118       571       519       309     2,429
    -------------------------------------------------------------------------
    Total Revenue    2,566       591       905     1,539      (504)    5,097
    Provision for
     credit losses     188        36         3        86       487       800
    Non-interest
     expense         1,417       465       728       924       195     3,729
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      961        90       174       529    (1,186)      568
    Income taxes       286        31        55       101      (526)      (53)
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        38        38
    -------------------------------------------------------------------------
    Net Income    $    675  $     59  $    119  $    428  $   (698) $    583
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $124,106  $ 33,560  $  9,662  $284,413  $ 10,085  $461,826
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    122  $  1,083  $    353  $    110  $      2  $  1,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the six
     months ended                                        Corporate     Total
     April 30,         P&C      P&C                         Servi-     (GAAP
     2008(2)        Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $  1,539  $    339  $    320  $    551  $   (361) $  2,388
    Non-interest
     revenue           850       133       709       414       152     2,258
    -------------------------------------------------------------------------
    Total Revenue    2,389       472     1,029       965      (209)    4,646
    Provision for
     credit losses     165        19         2        58       137       381
    Non-interest
     expense         1,346       365       722       823        38     3,294
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      878        88       305        84      (384)      971
    Income taxes       267        32       102       (74)     (290)       37
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        37        37
    -------------------------------------------------------------------------
    Net Income    $    611  $     56  $    203  $    158  $   (131) $    897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $124,033  $ 24,836  $  7,939  $232,408  $  3,483  $392,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    104  $    876  $    323  $     93  $      2  $  1,398
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Corporate Services includes Technology and Operations.
    (2) Operating groups report on a taxable equivalent basis - see Basis of
        Presentation section.
    Prior periods have been restated to give effect to the current period's
    organizational structure and presentation changes.

    Our results and average assets, allocated by geographic region, are as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                                             Other
    For the three months ended                    United   countr-
     April 30, 2009                     Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $    818  $    425  $     94  $  1,337
    Non-interest revenue                 1,016       265        37     1,318
    -------------------------------------------------------------------------
    Total Revenue                        1,834       690       131     2,655
    Provision for credit losses            127       245         -       372
    Non-interest expense                 1,331       520        37     1,888
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          376       (75)       94       395
    Income taxes                            36       (30)       12        18
    Non-controlling interest
     in subsidiaries                        14         5         -        19
    -------------------------------------------------------------------------
    Net Income                        $    326  $    (50) $     82  $    358
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $270,456  $158,681  $ 31,473  $460,610
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    441  $  1,206  $     23  $  1,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the three months ended                    United   countr-
     April 30, 2008                     Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $    851  $    247  $     76  $  1,174
    Non-interest revenue                 1,155       287         4     1,446
    -------------------------------------------------------------------------
    Total Revenue                        2,006       534        80     2,620
    Provision for credit losses             79        73        (1)      151
    Non-interest expense                 1,240       397        43     1,680
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          687        64        38       789
    Income taxes                           135         1        (8)      128
    Non-controlling interest
     in subsidiaries                        15         4         -        19
    -------------------------------------------------------------------------
    Net Income                        $    537  $     59  $     46  $    642
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $233,857  $128,427  $ 31,785  $394,069
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    421  $    970  $      7  $  1,398
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the six months ended                      United   countr-
     April 30, 2009                     Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $  1,617  $    850  $    201  $  2,668
    Non-interest revenue                 1,812       632       (15)    2,429
    -------------------------------------------------------------------------
    Total Revenue                        3,429     1,482       186     5,097
    Provision for credit losses            238       562         -       800
    Non-interest expense                 2,616     1,033        80     3,729
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          575      (113)      106       568
    Income taxes                            39       (86)       (6)      (53)
    Non-controlling interest
     in subsidiaries                        27        11         -        38
    -------------------------------------------------------------------------
    Net Income                        $    509  $    (38) $    112  $    583
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $272,241  $159,077  $ 30,508  $461,826
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    441  $  1,206  $     23  $  1,670
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the six months ended                      United   countr-
     April 30, 2008                     Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $  1,758  $    460  $    170  $  2,388
    Non-interest revenue                 1,746       576       (64)    2,258
    -------------------------------------------------------------------------
    Total Revenue                        3,504     1,036       106     4,646
    Provision for credit losses            153       221         7       381
    Non-interest expense                 2,391       811        92     3,294
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          960         4         7       971
    Income taxes                           143       (47)      (59)       37
    Non-controlling interest in
     subsidiaries                           28         9         -        37
    -------------------------------------------------------------------------
    Net Income                        $    789  $     42  $     66  $    897
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $235,054  $125,475  $ 32,170  $392,699
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    421  $    970  $      7  $  1,398
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Prior periods have been restated to give effect to the current period's
    organizational structure and presentation changes.
    





For further information:

For further information: Media Relations Contacts, Ralph Marranca,
Toronto, ralph.marranca@bmo.com, (416) 867-3996; Ronald Monet, Montreal,
ronald.monet@bmo.com, (514) 877-1873; Investor Relations Contacts, Viki
Lazaris, Senior Vice-President, viki.lazaris@bmo.com, (416) 867-6656; Steven
Bonin, Director, steven.bonin@bmo.com, (416) 867-5452; Andrew Chin, Senior
Manager, andrew.chin@bmo.com, (416) 867-7019; Chief Financial Officer, Russel
Robertson, Interim Chief Financial Officer, russ.robertson@bmo.com, (416)
867-7360; Corporate Secretary, Blair Morrison, Vice-President & Corporate
Secretary, corp.secretary@bmo.com, (416) 867-6785


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